Longwave Capital, a Pinnacle Investment Management-backed boutique Australian equities fund managing approximately $1.6 billion, has revealed its review of private credit firms indicates a concerning underestimation of risks facing property developers. The firm’s assessment prompted it to divest its only exposure to the sector, ASX-listed property and real estate lending investment specialist Centuria Capital. Centuria Capital provides investment solutions primarily focused on property and real estate sectors.
The review follows the collapse last month of Sydney residential real estate giant Bathla, which had over $3 billion in loans from private credit firms. Centuria Capital subsequently froze redemptions in some of its private credit funds exposed to Bathla, with $278 million secured across six of the developer’s projects. Longwave chief investment officer David Wanis stated, “We decided our research pointed to fundamental problems no confidence could overcome,” adding that the risks extend beyond Bathla, with more entities likely on the brink in the property development market.
Bathla, a significant developer of affordable housing in Sydney’s west, attracted substantial claims from other creditors, including RMBL Investments for $319.5 million and Ray White Capital for $216.8 million. Several contractors and even the Bathla family have also lodged significant claims. The market has reacted, with Centuria Capital shares plunging over 30 per cent this year. Other major lenders like MA Financial, HMC Capital, and Pinnacle have also seen share declines, partly due to concerns about their private credit exposure. Analysts expect increased regulation from ASIC could further raise costs and reduce returns for private credit issuers, potentially prolonging recovery for these securities.
