PrimaryMarkets offers liquidity alternative for unredeemable units in unlisted property trusts6 September 2023
PrimaryMarkets, a capital raising Platform for unlisted companies and part of the ASX listed Complii Fintech Solutions Group (ASX – CF1), says liquidity or the ability for investors to retrieve their capital has become an issue for unlisted property fund investors this year.
Unlisted property trusts have many benefits; however, liquidity is not one of them.
Jamie Green, Executive Chairman PrimaryMarkets says “Investments in property trusts are largely illiquid, notwithstanding potential capital gain and regular distributions.
“We know that financial advisers and property trust managers often recommend an investment in unlisted property trust funds as part of one’s ‘non cash bucket’ in a portfolio, recognising the illiquidity feature inherent in this asset class.
“Nevertheless, life events mean some holders of unlisted property trusts need cash and wish to liquidate some or all of their holding from time to time.”
Green adds “Implications of this illiquidity feature create not only delayed access to funds but can also impact a trust’s performance. If a trust has to sell property assets in a hurry to meet redemption requests, it might not get the best price. This might materially reduce the amount of cash available to meet redemptions and in some circumstances may even trigger insolvency.
“It could lead to pricing ambiguities as well whereby in a market downturn, the reported net asset value (NAV) of a trust may not accurately reflect the real market value of its properties, especially where the Manager is a forced seller.”
Although some property trusts have liquidity events from time to time, the amount able to be liquidated is often small and dependent on market and economic conditions and the demand for liquidity by the total cohort of investors of that particular property trust.
A little-known pathway to gain liquidity for unlisted property trust holders may be via selling their
holdings on Australia’s leading unlisted securities Platform, PrimaryMarkets.
“Although conceived as a trading platform for unlisted or private company share trading, today PrimaryMarkets can offer a potential exit route for holders of units in an unlisted property trust,” adds Green.
“It all depends on the terms of the relevant documentation, such as the unit trust deed or the PDS for the investment. If the relevant documents place no restrictions on the sale of units in the trust, then listing them on the PrimaryMarkets platform should be a simple and straight forward option,” he adds.