Centro’s business model has continued to evolve over many years and can be explained with reference to the Cemented Co-Investment Structure depicted above.
Two Tier Ownership Structure
Centro prefers to cement ownership of its retail property assets through a two tier ownership structure where Centro effectively owns 50% of a diversified fund (e.g. Direct Property Fund, Direct Property Fund International) which in turn owns 50% of an ownership fund (e.g. Centro MCS Syndicates, Centro Retail Trust, Wholesale Funds) which in turn own the underlying retail property asset financed by both equity and debt. Therefore through the two tier structure Centro has an effective 25% equity ownership in the underlying retail property assets.
Management Control or “Cementing” Ownership
Through Centro’s 50% co-investment in each tier of the business model Centro effectively controls or cements the ownership of each fund and therefore cements the ownership of each underlying property asset under this structure.
Co-Investment Philosophy
Centro co-invests its own equity into both the diversified funds and the ownership funds with other external investors. This aligns the interests of Centro and its investors along with external investors. This gives external investors increased comfort that Centro will continue to efficiently manage the underlying retail property assets and funds in order to maximise investor returns.
Centro Diversification Benefits
The 25% equity investment in order to cement the ownership of the underlying retail property asset allows Centro to effectively own and control four retail property assets for the same amount of equity as would control only one asset under a direct ownership structure. This offers Centro investors ownership exposure to four times as many retail property assets providing greater diversification benefits and growth opportunities.
Increased Funds Under Management Enhances Investor Returns
As well as diversification benefits, Centro has shown that increased funds and assets under management have flow through benefits to increased Services Business income generated from funds management, property management, development and leasing capabilities. This growth is achieved without the need for Centro to raise new equity, thereby having a significant positive impact on enhancing returns for the benefit of all Centro investors.