ASX ANNOUNCEMENT: ASX:QRI Quarterly Update – September 2022
26 October 2022
The Qualitas Real Estate Income Fund (ASX:QRI) September 2022 quarterly update is now available. You can view this latest update in the ASX announcement.
- Attractive distribution return of 5.58% over the last 12 months (LTM) calculated on a LTM average NTA of $1.60
- As of 30 September 2022, the Trust’s capital is fully invested
- Variable rate exposure represents 67% of total portfolio as at 30 September 2022 up from 54% as at 30 June 2022, providing interest rate and inflation protection as any increase in the cash rate and/ or risk margins are passed through to the unitholder
- Strong credit quality continues with no impairments or interest arrears as at 30 September 2022
- Net Asset Value (NAV) per unit of $1.60 as at 30 September 2022
| Fund and market update
During the September quarter, QRI continued its strong track record of delivering monthly returns to investors, recording an attractive LTM distribution return of 5.58% per annum to 30 September 2022 based on the LTM average NAV of $1.60.
The portfolio continues to perform in line with its investment objectives, with no loan impairments or interest arrears recorded during the quarter, and as at 30 September 2022 the Trust’s NAV per unit was relatively unchanged at $1.60.
QRI loans are structured to target attractive yield with inflation protection. The short duration of the QRI portfolio allows for re-pricing of loans and the revaluation of loan security. QRI has a fully secured portfolio with an average Loan-to-Value ratio (LVR) of approximately 66%, which provides a strong equity buffer against any reduction in property values. In addition, security is further strengthened with the majority of QRI’s investments subject to personal guarantees as of 30 September 2022.
| Interest rates and Trust performance
The Manager believes QRI is well positioned during this current period of rising interest rates and inflation because:
- RBA Cash Rate increases are passed through to borrowers for the Trust’s variable interest rate loans. As of September 2022, 67% of the QRI’s portfolio is loans based on a variable interest rate and this percentage is expected to increase further as new loans are generally priced on variable rate base rates;
- Highly defensive nature of commercial real estate (CRE) income, as investors’ interest is secured against real assets with good levels of equity buffer. QRI is the only pure-play ASX listed CRE debt fund providing retail investors access to this asset class which was previously exclusively financed by institutional and high net worth investors;
- Historically, risk margins tend to rise in times of market uncertainty and volatility, and QRI is well positioned to capture this upside as its loans have short duration of 1.1 years, allowing for re-pricing of loans and revaluation of underlying real property security;
- QRI provides attractive income returns with inflation protection through a fully secured portfolio, an LVR of 66%, and a weighted loan maturity which allows for frequent revaluation and re-assessment of returns; and
- QRI provides solutions to funding gaps in the CRE sector as opposed to competing with the banks. The Manager doesn’t take a probability approach in assessing default risk and allocating provisions. All borrowers and each loan in the portfolio are closely reviewed on a monthly basis with detailed assessment; and
- Recognising and managing the risks and reduced liquidity in the current economic environment, which provides ample opportunities for experienced asset managers like Qualitas to deliver attractive risk-adjusted returns for investors.
QRI is well positioned to capture upside from a rising interest rate environment, with a high proportion of variable interest rate loans and a relatively short average loan term. These key factors, combined with the recent widening of credit spreads, is anticipated to benefit the returns generated for QRI investors.
QRI maintains a strong track record of delivering attractive monthly returns and no loan impairments to date. The Manager continues to see a dynamic CRE debt market delivering a strong pipeline of opportunities for QRI. We also remain vigilant with respect to asset management and to our approach to managing risk across the portfolio.
 Past performance is not indicative of future performance
This communication has been issued and authorised for release by The Trust Company (RE Services) Limited (ACN 003 278 831) (AFSL 235150) as responsible entity of The Qualitas Real Estate Income Fund (ARSN 627 917 971) (“Trust”) and has been prepared by QRI Manager Pty Ltd (ACN 625 857 070) (AFS Representative 1266996 as authorised representative of Qualitas Securities Pty Ltd (ACN 136 451 128) (AFSL 34224)).
This communication contains general information only and does not take into account your investment objectives, financial situation or needs. It does not constitute financial, tax or legal advice, nor is it an offer, invitation or recommendation to subscribe or purchase a unit in QRI or any other financial product. Before making an investment decision, you should consider whether the Trust is appropriate given your objectives, financial situation or needs. If you require advice that takes into account your personal circumstances, you should consult a licensed or authorised financial adviser.
While every effort has been made to ensure the information in this communication is accurate; its accuracy, reliability or completeness is not guaranteed and none of The Trust Company (RE Services) Limited (ACN 003 278 831), QRI Manager Pty Ltd (ACN 625 857 070), Qualitas Securities Pty Ltd (ACN 136 451 128) or any of their related entities or their respective directors or officers are liable to you in respect of this communication. Past performance is not a reliable indicator of future performance.
The Product Disclosure Statement (“PDS”) and a target market determination for units in the Trust can be obtained by visiting the Trust website www.qualitas.com.au/qri. The Trust Company (RE Services) Limited as responsible entity of the Trust is the issuer of units in the Trust. A person should consider the PDS in deciding whether to acquire, or to continue to hold, units in the Trust.