Challenger presents a lifeline as Elanor works to get back trading on ASX

Challenger will leave $3bn of commercial property under smaller manager Elanor’s control as attempts are made to stabilise its operations.

Elanor sold the Leura Gardens Resort in the Blue Mountains of NSW to Jerry Schwartz.

Financial services company Challenger has thrown suspended funds manager Elanor Investors Group a lifeline by agreeing to keep its commercial real estate portfolio under the smaller group’s wing.

Elanor has been suspended from trading on the Australian Securities Exchange since August as it attempts to refinance debts and sell assets to stay afloat.

At one point the company was managing more than $6bn of assets but was caught out by its rapid expansion into risky properties and taking on too much debt to support its property funds.

Elanor said that it would continue as investment manager for Challenger Life Company’s commercial property portfolio after a review of the arrangement.

Elanor managing director Tony Fehon said the company was “well advanced” in the execution of its strategy to strengthen its balance sheet and simplify the business.

He said he had expected to retain the Challenger mandate – spanning about $2.8bn of property – and Elanor had secured a refinancing deal that allowed it to manage its funds, while also selling down assets.

The company is working to finalise its accounts, giving it a platform to either continue or deal with offers for all or part of the company, in a process to be run via Citi.

Elanor said it would “actively consider approaches made by third parties and engage further with interested parties on proposals which maximise securityholder value, including a sale of the business”.

It has sold about $190m of assets since July, taking discounts of about 4.7 per cent to June values, and coming deals are at around this level.

The company sold Manning Mall to Centuria Capital and separately sold Northway Plaza, both out of its Elanor Property Income Fund, for a combined price of $53.4m. The remaining asset, Gladstone Square, will also be sold.

The selldown of the Elanor Hotel Accommodation Fund is going above book value overall, and Elanor is selling the Ibis Styles Port Macquarie and Mantra Pavilion Wagga Wagga for a total of about $25m.

The deals being struck via HTL Property showed values had held up. Earlier this year it sold the Leura Gardens Resort to tycoon Dr Jerry Schwartz.

Real estate agency JLL is getting strong “pre-marketing” interest for the other hotels, which have been carved up into three tranches that will be sold off over 2025. Elanor has already shifted day-to-day hotel operations to 1834 Hotels.

Elanor this month refinanced its existing senior secured debt facility via an $85m debt bridging facility from Keyview Financial Group. It will repay the Keyview facility by selling assets, which is expected to return $100m of balance sheet capital over the next 18 months. Elanor is restructuring its $40m unsecured corporate notes that were not covered by Keyview. The note coupon will be boosted to 15 per cent per annum and holders will be granted more security.