Centuria Capital Addresses SQM Research Report on Bathla Group Loan Exposure in Credit Fund

Overview of Centuria Capital's Credit Fund Operations and Scale

Centuria Capital Group operates as an ASX-listed specialist investment manager offering diverse investment opportunities in real estate and credit strategies. As of 31 December 2025, the company managed $21.8 billion in assets, establishing it as a major player in Australian alternative asset management. The Centuria Bass Credit Fund is a flagship vehicle managed by entities linked to Centuria Bass Credit Pty Limited.

The Centuria Bass Credit Fund is a wholesale fund focused on first mortgage property debt. As of 30 June 2026, it held a net asset value of $272 million and comprised 53 first mortgage property debt investments. The fund delivered a 0.68% return in June 2026, an 8.76% return over the prior 12 months, and a 9.03% annualised return since inception, reflecting consistent performance supported by senior lending secured by real property.

Details of Bathla Group Loan Exposure within the Credit Fund

The Centuria Bass Credit Fund currently holds six loan facilities extended to the Bathla Group, forming a multi-loan relationship developed over time. Two facilities are construction loans, including one with ongoing exposure to a substantially completed project. The other four are residual stock or land loans. Importantly, all six loans continue to accrue interest, indicating the borrower remains current on payments.

The fund’s Bathla Group exposure is protected by a robust security framework. All six loan facilities are backed by first mortgage security, placing the fund ahead of other creditors in enforcement scenarios. Partial cross-collateralisation across these loans provides additional protection by enabling claims across multiple borrower assets. This layered security aligns with the fund’s strategy, as 100% of its transactions are secured by first mortgages.

CNI’s Direct Lending Exposure to Bathla Group

Separately, CNI holds a direct lending exposure to the Bathla Group through a $4.5 million loan facility to a Bathla Group entity. This represents the company’s only balance sheet exposure to the borrower, reflecting a deliberate limitation of direct counterparty risk. CNI clarified it is not a unitholder in the Centuria Bass Credit Fund, maintaining a clear distinction between its fund management role and direct creditor position.

This disclosure enhances transparency regarding CNI’s capital at risk with Bathla Group and demonstrates disciplined management of direct counterparty concentration risk alongside larger exposures managed via the credit fund.

Governance and Lending Decision Controls Concerning David Stone

Addressing media questions about Bathla Group connections to Centuria Bass Credit employee David Stone, the company clarified governance measures. Mr Stone joined Centuria Bass Credit in April 2025, having previously worked for a Bathla Group entity for 12 months. He holds no ownership or control over Bathla Group entities.

Governance safeguards prevent conflicts of interest. Mr Stone is not a voting member of the Centuria Bass Credit Investment Committee, which approves loan facilities, so he has no voting influence over Bathla Group loans. The lending relationship predates Mr Stone’s employment by over three years, confirming it was established independently of his involvement.

Credit Fund Performance and Risk Metrics

The Centuria Bass Credit Fund’s portfolio reflects conservative underwriting of first mortgage property debt. As of 30 June 2026, the fund’s weighted average loan-to-value ratio stood at 66.9%, based on valuations at loan approval by the investment committee. This ratio indicates loans average about two-thirds of the underlying property values, providing substantial equity buffers against price declines. Such LVRs align with prudent Australian mortgage lending standards.

The fund has maintained resilient returns despite market volatility, delivering an 8.76% return over the 12 months to 30 June 2026 and a 9.03% annualised return since inception (excluding the initial ramp-up period). All 53 investments benefit from first mortgage security, reflecting disciplined underwriting and strong security protections.

Centuria’s Planned Engagement with SQM Research

Following the SQM Research report that sparked media attention, Centuria announced plans to engage constructively with SQM Research. The company intends to seek clarifications and corrections where necessary, aiming to address any factual inaccuracies or misrepresentations through dialogue. This approach indicates Centuria views some report aspects as resolvable by providing additional context or data.

While the company did not specify all concerns raised by SQM Research, its willingness to engage rather than dismiss the report suggests confidence in its governance and credit security frameworks. This measured response aligns with fund managers’ efforts to maintain investor trust amid heightened scrutiny.

Credit Fund Security Structure and Investor Safeguards

The Centuria Bass Credit Fund employs multiple layers of security to protect unitholders. First mortgage security across all investments ensures senior creditor status in enforcement scenarios. Partial cross-collateralisation among Bathla Group loans creates secondary claims across multiple borrower properties, mitigating risks from individual asset stress.

These protections enhance loss recovery potential in adverse conditions. First mortgage security ranks highest in property lending claims, while cross-collateralisation prevents selective default on individual loans. Together, these features establish a strong creditor position to withstand typical property market downturns.

Broader Market Context for Credit Fund Scrutiny

The increased media and analyst focus on the Centuria Bass Credit Fund’s Bathla Group exposure reflects wider market attention to credit fund concentration and governance amid rising interest rates and property market volatility. Over the past 18 months, Australian credit funds have faced intensified scrutiny of counterparty risks, underwriting standards, and potential conflicts within management teams. The SQM Research report exemplifies this trend.

Detailed disclosures on borrower relationships, security arrangements, and governance controls have become key differentiators for credit fund managers. Centuria’s transparency—including Mr Stone’s employment history, the pre-existing Bathla Group relationship, and voting restrictions—meets market expectations for clarity on potential conflicts. The company’s constructive stance toward SQM Research may reassure investors about its governance rigor.

Investor Implications for Centuria Capital Group

For Centuria Capital Group equity investors, the update offers reassurance on governance and security protections within the flagship credit fund. The fact that Bathla Group lending predates potentially conflicted personnel and that voting restrictions prevent undue influence demonstrates effective procedural safeguards. The Bathla Group exposure should be viewed relative to the fund’s $272 million net asset value and diversified portfolio of 53 first mortgage investments.

Centuria’s proactive engagement with SQM Research signals management confidence and openness to external inquiry, which may help preserve reputation and investor confidence. However, investors should monitor the engagement outcome, as any substantive changes to disclosures or management practices could indicate material issues beyond factual clarifications.

Next Steps and Monitoring Recommendations for Investors

The immediate focus for investors is the result of Centuria’s dialogue with SQM Research. The company’s commitment to seeking "appropriate clarification and correction where required" suggests ongoing discussions. Investors should watch for announcements detailing engagement outcomes or any governance, disclosure, or management changes arising from this process.

Additionally, investors should track the Centuria Bass Credit Fund’s ongoing performance and the status of Bathla Group loan facilities. One construction loan remains exposed to a substantially completed project; its completion will be a key milestone potentially impacting that facility’s risk profile. Continued interest accrual on all six Bathla Group loans is material to fund returns and credit quality. Regular fund performance reports will provide transparency on these developments.