Key Takeaways

  • SQM Research cut the Centuria Bass Credit Fund from 4.0 stars to 3.25 stars; Centuria replied on the ASX on 23 July 2026, disclosing six first-mortgage facilities to Bathla Group entities.
  • The fund is open-ended with monthly liquidity against illiquid construction and land loans, a structure inherently sensitive to a rush of withdrawal requests.
  • Centuria has reaffirmed FY26 operating earnings guidance of 13.6 cents per security and distributions of 10.4 cents, with full-year results due in the second half of August 2026.

Why Centuria is suddenly in focus

Centuria Capital Group (ASX: CNI) is one of Australia's larger listed property fund managers, with A$21.8 billion under management at 31 December 2025. In late July 2026 attention swung to a small wholesale lending fund.

On 23 July, Centuria lodged an ASX statement responding to media commentary on the Centuria Bass Credit Fund and its loans to Bathla Group, a Western Sydney residential builder and developer. Research house SQM Research had downgraded the fund.

Stockopedia data put CNI near A$1.69 on 20 July; Kalkine Media recorded a close of A$1.47 on 24 July, well below the A$2.00 issue price of June's equity raising.

What Centuria actually told the market

The statement said the fund (CBCF) holds six loan facilities to Bathla entities: two construction loans, one substantially complete, the rest residual stock or land loans. Centuria said it holds first mortgage security over all, with partial cross-collateralisation and that all keep accruing interest.

Centuria also disclosed a A$4.5 million loan facility advanced from its own balance sheet to a Bathla entity, describing it as CNI's only direct balance-sheet exposure to the group.

Centuria also rejected governance allegations about David Stone, a co-head of lending who joined in April 2025 after 12 months with a Bathla entity, saying he has no ownership interest in any Bathla entity and no vote on the investment committee.

The rating cut, and why open-ended credit funds are vulnerable

Financial Standard and Financial Newswire reported that SQM lowered CBCF from 4.0 stars to 3.25 stars, below the level SQM treats as investment grade. SQM rated the fund 4.0 stars, or "superior", in May 2025 and has not published its reasoning.

Reporting attributed to The Australian said SQM asked rated managers to disclose how much they had lent to Bathla and what share of each fund it represented. Ratings matter because advisers rely on them: a downgrade can halt inflows and trigger reviews of existing holdings.

CBCF launched in October 2021 as an open-ended, unlisted wholesale trust with a A$100,000 minimum and monthly liquidity. Guidelines cap one investment at 15% of net asset value and one borrower at 20% and SQM noted there is no secondary market in units.

The tension is plain. Investors can ask monthly, but loans repay only when projects settle, sell down or refinance. Managers bridge that with cash, repayments and inflows and can stagger withdrawals. Centuria has not said redemptions are restricted, nor published redemption data.

What is documented about Bathla, and what is not

Bathla Group builds across Western Sydney. Commercial Real Estate reported borrowings near A$2.7 billion against A$6.5 million of cash, net assets of A$430 million, revenue of A$1.3 billion and net profit of A$80.4 million, naming Alceon as its largest financier.

Insolvency Insider Australia reported in July 2026 that Building Commission NSW had made more than 40 site inspections, put group debt at about A$3.1 billion across close to 11,000 apartments and said KordaMentha and Newpoint Advisory were advising lenders.

Bathla's legal representative has said the group remains compliant with its facilities and continues financing projects. None of the sources reviewed record an administrator or liquidator being appointed and Centuria has not disclosed that any Bathla facility is in default.

The credit platform inside a A$21.8 billion manager

Centuria is a stapled group combining funds management with co-investments. It manages Centuria Industrial REIT (ASX: CIP) and Centuria Office REIT (ASX: COF), holding 16.19% and 15.25% at 31 December 2025, plus unlisted property funds, Centuria Healthcare, agriculture, investment bonds and ResetData.

Real estate finance, run through Centuria Bass Credit, carried a A$2.5 billion loan book at 31 December 2025, with 88% residential exposure, 92% first mortgages, a 67.7% weighted average loan-to-value ratio and under 1% principal impairments since inception across 196 loans.

CBCF's A$272 million is roughly a tenth of that book. Centuria lifted its stake in Centuria Bass Credit from 80% to 100% during the December half, increasing both the earnings contribution and the reputational tie.

Earnings, guidance and the balance sheet

For the December 2025 half, Centuria reported operating net profit after tax of A$54.6 million and operating earnings of 6.6 cents per security, up 6.5%, with statutory net profit after tax of A$49.8 million against A$14.8 million a year earlier.

It upgraded FY26 operating earnings guidance to 13.6 cents per security, 11.5% above FY25 and guided to distributions of 10.4 cents, reaffirming earnings guidance with June's raising. FY26 results are due in late August, with providers pointing to 21 August.

Operating gearing was 12.4% at 31 December 2025, cost of debt 7.6% and net asset value A$1.78 per security. June's fully underwritten A$300 million raising, at A$2.00 per security, funds ResetData AI factories and real estate origination, leaving the parent comfortably capitalised.

The wider Australian private credit debate

ASIC has been circling the sector. Report 814, published 22 September 2025, drew on interviews with more than 30 market participants and flagged inconsistent valuation practices, prevalent conflicts of interest, opaque fees and few reported impairments.

Report 820, published 5 November 2025, followed surveillance of 28 private credit funds. On liquidity, ASIC praised clear redemption disclosure and stress testing and criticised absent liquidity policies, side letters granting unequal redemption rights and distributions funded from investor capital.

The backdrop is global too. Blue Owl Capital restricted investor redemptions in February 2026 and liquidity strain in private lending has recurred since. Australian residential development credit adds its own cycle of build costs, settlement risk and planning delays.

Principal risks

Redemption pressure is the live risk. If advisers act on the downgrade, CBCF could face withdrawal requests it can meet only as loans repay, testing both liquidity management and disclosure.

Valuation of unlisted loans is close behind. A loan carried at par earns its stated return until it does not and a borrower can stay current on interest while security values weaken. Contagion is plausible, since SQM approached multiple managers about Bathla.

Beyond credit, CNI carries the usual risks of a listed property manager: office and industrial values, transaction volumes that drive performance fees, development risk at ResetData and interest rates. Reputational damage is slow to repair.