Brexit exemplifies Liquidity needs for Trust Market
Brexit exemplifies Liquidity needs for the Property Trust Market worldwide
PrimaryMarkets’ Game Changing Solution
As every investor knows when they buy into an unlisted property Trust/Fund they must carefully weigh up the lack of liquidity. Usually, the only liquidity event available to investors occurs when the fixed term of the Trust comes to an end - generally between 5 and 10 years from first investment.
In some circumstances investors can seek to have their investments redeemed by the relevant Fund Manager however the GFC and, more recently Brexit, has highlighted the risks associated with relying on this as the source for liquidity.
Inside little more than a few weeks since Brexit, approximately GBP£18 Billion of property Trusts in the British commercial property market has been frozen as investors rush to redeem their units to get liquidity and even to take money out of Britain.
Some of the biggest British property funds (e.g. Standard Life, Aviva, Aberdeen Fund Managers, Henderson Global Investors, Columbia Threadneedle and Canada Life) have quickly moved to freeze their funds and they expect them to remain closed for months (if not years) leaving thousands of unitholders “out in the cold”.
All in all the British market value, pre-Brexit, for property Trusts was made up of commercial real-estate which represents in aggregate BGP£800 Billion (AUD$1.04 Trillion) and residential real-estate of roughly BGP£5 Trillion (AUD$8.563 Trillion) (source: Jefferies Group LLC Report 5 July 2016).
This freezing of British Trusts also is an issue for listed British Trusts e.g. Henderson Group PLC – which is listed in both Britain and Australia – has seen its ASX share price (ASX.HGG) fall 26% from AUD$5.13 to AUD$3.83 in a mere 3 weeks (now market cap AUD$4 Billion).
Mark Carney, Governor of the Bank of England said last week “There is a liquidity mismatch in property funds.”
As context, in Australia:
- Immediately post the GFC by late 2009:
- There were more than AUD$15 Billion in frozen mortgage funds and a further AUD$10 Billion split evenly between frozen property funds and frozen
cash-enhanced funds, some of which remain frozen even today – some 8 years later.
- Some 100,000 Australians were caught up with money frozen in mortgage and property funds.
- There were more than AUD$15 Billion in frozen mortgage funds and a further AUD$10 Billion split evenly between frozen property funds and frozen cash-enhanced funds, some of which remain frozen even today – some 8 years later.
- Today, it is estimated that unlisted property trusts hold about AUD$25 Billion in assets – through managers such as Cromwell, Charter Hall, BlackWall,
Heathley and Sentinel.
- As an asset class, unlisted property trusts post the GFC have recorded annual returns of >9%.
The perennial problems presented by unlisted Trusts worldwide that never go away are:
- They are always illiquid.
- When an investor wants to divest they may not always be able get their money out.
- The Trust Manager may, in its sole discretion, freeze redemptions from the Trust.
- When the Trusts are frozen they can remain so for months and often years.
Additionally, liquidity is a major concern for investors in other financial structures such as mortgage funds, property syndicates and the like.
PrimaryMarkets’ platform provides a liquidity alternative for unlisted Trust investors not only in Australia, the UK but also worldwide and is only a keyboard stroke away.
PrimaryMarkets is a relatively new player to the worldwide investment market – being the platform to transact illiquid securities and investments. Live since 25th February 2016 it has quickly grown to 4,200+ Member-Followers (all Buy-Side Members being Accredited, Wholesale or Professional Investors) with over A$320M of assets sourced from Australia, UK, Singapore and USA being listed to trade.
Seed investors in PrimaryMarkets include Pelorus Private Equity Limited. In 2008 the then ASX listed Pelorus attempted to facilitate liquidity for the investors in a number of unlisted property funds controlled by Centro Property Group. The 5,000+ investors in these funds were caught up in the banking issues of their Trust Manager which were totally separate from structures in which they had invested. To protect the larger empire, Centro’s Trust Manager fought “tooth and nail” to stop off-market trading in their units to protect their management rights and fee income. Centro’s tactics eliminated any hope investors had of liquidity. Talk about a conflict!
PrimaryMarkets’ Customised Eco-Systems for Unlisted Trusts e.g. BlackWall (ASX.BWF)
PrimaryMarkets has worked with BlackWall Property Funds to this month launch a customised Eco-System for the 1,000+ unitholders in BlackWall’s 13 unlisted property Trusts and with their unlisted property funds (combined value A$500M+). BlackWall Property Funds is the property and funds management arm of the ASX listed BlackWall Limited (ASX BWF).
BlackWall Property Funds’ Chief Executive Officer, Stuart Brown, said:
“The BlackWall member Eco-System enables unitholders to offer positions to other unitholders in those same funds before they are released to the wider PrimaryMarkets membership. This initiative aims to give investors that know our products well the opportunity to grow positions, as well as, giving sellers exclusive access to potential buyers that already hold those investments.”
The Eco-System features include:
- Specific Membership registration page for all BlackWall unitholders.
- BlackWall Funds are provided its own ‘Pillar’ at the PrimaryMarkets Menu/dropdown section.
- All BlackWall Funds are pre-loaded in the Eco-System to streamline the Listing process for Sellers.
- Limited first right of refusal - Units for sale are offered:
- First, to other unitholders to acquire additional BlackWall securities.
- Next, to all other unitholders in the other 12 BlackWall Trusts.
- Lastly, to all other PrimaryMarkets Members
BlackWall Property Funds' Chief Executive Officer, Stuart Brown, said:
“The partnership between BlackWall and PrimaryMarkets was already active with the offering for sale of units in our funds which we listed on PrimaryMarkets. We believe the relationship with PrimaryMarkets will be beneficial to our ongoing business. We are now able to provide an early liquidity event for our unitholders should they need it, while BlackWall now has access to a new group of wholesale/professional investors who have already indicated their interest in unlisted property funds."
PrimaryMarkets' Chief Executive, Nicholas Capp said:
“BlackWall Property Funds are an excellent addition to the PrimaryMarkets platform, as it manages real estate on behalf of retail, high net worth and institutional property investors. BlackWall’s client base reflects PrimaryMarkets’ typical member profile, that of sophisticated, accredited, wholesale or professional investors who are knowledgeable about financial markets, are sector focused, want integrity and privacy and accept risks for the appropriate reward.”
PrimaryMarkets is quickly adding discrete customised Eco-Systems for other pro-active Trust Managers.
Naturally, PrimaryMarkets can easily build similar discrete customised Eco-Systems for other Trusts worldwide.
So, if an investor is a unitholder in an illiquid Trust, PrimaryMarkets welcomes you to trade your securities of our platform PLUS we would urge all unitholders to approach their Trust Manager and encourage them to contact PrimaryMarkets and get them to create their own discrete customised platform like BlackWall to take advantage of the liquidity solution as now offered by PrimaryMarkets and freely available to all unitholders.