Fund Overview
If you’re looking for an alternative to shares and traditional fixed income and property investments, the Qualitas Real Estate Income Fund (ASX:QRI) could help you diversify your portfolio and meet more of your goals by investing in the growing opportunities of the commercial real estate (CRE) credit market.
Fund Benefits
Property exposure without ownership risk
More liquid investment in the property market’s opportunities through CRE credit instead of direct property ownership.
Regular income1 and the potential for capital preservation
CRE loans secured by real property mortgages aims to provide for low risk of capital loss and regular, predictable income1.
Expert real estate investment manager
The unrivalled expertise of a leading Australian CRE credit specialist and investment manager.
Fund Facts
ASX listing date | 27 November 2018 |
S&P Global Industry Classification Standard Code and Classification | 40204010 Mortgage Real Estate Investment Trust |
Fund size | $714m |
Target return | RBA cash rate2,4 + 5.0% to 6.5% p.a. (net of fees and expenses). |
Distribution | Cash (monthly) |
Unit pricing | Weekly |
Distribution reinvestment plan (DRP) | Active |
ASX: QRI
NAV at COB
Key Documents
Key Information
Research Ratings and Reports
ASX Announcements
Key Reporting Dates
2024 full year financial results | Month of August |
2024 half year results | Thursday 29 February 2024, 10am (AEDT) |
Monthly performance update | On or about the 13th business day of each month |
Distribution advice | Last business day of each month |
Distribution payment date | On or around 16th of each month |
NAV reporting | Weekly and each month end |
NAV month end updates | On or before 14th of each month |
Distribution Reinvestment Plan (DRP)
Reinvesting your distributions allows you to invest in additional QRI units without paying brokerage,
commissions or other transaction costs. The Distribution Reinvestment Plan (DRP) is currently active.
View the DRP ASX Announcement.
Company | Analyst |
Citigroup | Howard Penny |
Performance
The Trust's portfolio continues to perform in line with investment objectives with no interest arrears or impairments recorded on any loans7.
Fund Performance
Trailing 12-month returns vs. deployment1,2
Historical net returns by period1,5
% | 1mth | 3mth | 6mth | 1yr | 3yr3 | Incep3,4 |
---|---|---|---|---|---|---|
Net return | 0.71 | 2.19 | 4.36 | 8.79 | 7.54 | 6.94 |
Target return at 5.0% | 0.78 | 2.34 | 4.68 | 9.30 | 7.70 | 6.70 |
Target return at 6.5% | 0.90 | 2.71 | 5.43 | 10.80 | 9.20 | 8.20 |
RBA cash rate | 0.36 | 1.09 | 2.18 | 4.30 | 2.70 | 1.70 |
Distribution | 0.73 | 2.19 | 4.36 | 8.82 | 7.54 | 6.91 |
Spread to RBA | 0.37 | 1.10 | 2.18 | 4.52 | 4.84 | 5.21 |
Performance Updates and Financials
Unit Price History
Portfolio Underlying Exposure
Portfolio composition6,7
1. Past performance is not a reliable indicator of future performance. 2. Deployment is Invested Capital which represents the amount and % of the Trust’s total capital that has been committed and invested as at month end in Investments, including the Trust Loan Receivable. Manager has allowed for an appropriate cash buffer at all times, which will generally be up to 5% of the Trust’s capital. 3. Annualised. 4. IPO in November 2018. 5. Net returns are calculated based on the average month end NAV. 6. The portfolio statistics are determined on a look-through basis having regard to the loans in the underlying Qualitas Funds as indicated. The classifications of these diversification parameters are determined by the Manager. Figures stated are subject to rounding. 7. As at 31 August 2024. 8. Percentage based on total invested capital excludes cash and Trust Loan Receivables.
How to invest
Get In TouchFor advisers
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For investors
Speak to your financial adviser or broker
News and Insights
Please keep me up to date with the latest QRI news and insights.
Qualitas is committed to ensuring the confidentiality and security of individuals’ personal information.
Frequently Asked Questions
Commercial real estate (CRE) credit refers to loans provided to borrowers to finance real estate for investment and development purposes. All CRE loans are secured by real property mortgages.
The borrowers are typically property developers, private corporations or high net worth individuals.
CRE loans can be used to purchase land that is vacant, developable or can be improved upon (with buildings, utilities or other services), or property (buildings that are complete or under construction). The land or property is the mortgage collateral (or security) for the loan, and investors earn income from the ongoing loan interest and fees.
Types of loans include:
- Land (pre-development) loans: Used to fund land that has been approved for development.
- Construction loans: Used to fund property development and construction costs.
- Investment loans: Used to fund completed buildings that can be occupied and generate income from tenancies.
Loans across the real estate life cycle
CRE loans may provide an alternative way to earn income, especially for those investors looking for predicable income though attractive risk-adjusted returns^. The ongoing interest payments from CRE loans – which have agreed interest rates and fees – underpin this regular income, which is typically paid to QRI investors in the form of distributions.
Qualitas is one of Australia’s leading real estate investment managers, with a long history in managing CRE credit. As a property specialist, Qualitas on behalf of investors sources lending opportunities in the CRE credit market, undertakes credit assessment of the loan and actively manages the loan performance and risks.
How CRE credit generates regular income^
^ The payment of regular monthly cash income is a goal of the Trust only and neither the Manager nor the Responsible Entity provide any representation or warranty (whether express or implied) in relation to the payment of any monthly cash income. Past performance is not a reliable indicator of future performance.
An alternative financier is not a traditional bank, with the main difference being how they raise capital to fund their lending activities. While a bank will raise capital from deposits and wholesale funding, an alternative financier will raise equity capital from investors. Qualitas is an alternative financier that provides CRE loans to commercial borrowers such as property developers.
The opportunity for alternative lenders is underpinned by the following:
- Bank withdrawal from CRE lending due to APRA and government regulation has widened the gap for alternative lenders.
- Borrowers are willing to pay a premium for more flexible and bespoke forms of finance e.g. mezzanine lending is typically only provided by alternative lenders.
As an experienced manager of CRE credit, Qualitas is well positioned in the Australian market with our long-standing local presence and deep borrower relationships built on trust and repeat lending.
Qualitas is a “through-the-cycle” investor. We are sector agnostic and always seek to invest in the best risk-adjusted return opportunities having regard to the timing within the cycle of the market.
CRE credit is attractive to investors seeking regular income with the potential for capital preservation. Additionally, CRE credit provides exposure to the property market without the need to actually own property. Its benefits include:
Predictable and regular income^
- The loan interest and fees are agreed upfront, to provide fixed income for the loan term.
- Can provide cash flow from regular interest payments.
The potential for capital preservation and portfolio diversification
- The loan value does not fluctuate like property values.
- CRE credit ranks ahead of equity, meaning it is repaid first.
- CRE credit has the benefit of security i.e. mortgages over property, which can be sold to meet loan repayment.
- The equity buffer provides downside protection – depending on the loan-to-value (LVR) ratio, property values will need to fall to a certain level before the loan is at risk of not being fully repaid.
While CRE credit is a relatively new asset class for retail investors in Australia, it has been available to wholesale and institutional investors for decades. As banks continue to reduce their exposure to CRE loans, alternative financiers such as Qualitas have increased their market share and made this asset class accessible to retail investors.
^ The payment of regular monthly cash income is a goal of the Trust only and neither the Manager nor the Responsible Entity provide any representation or warranty (whether express or implied) in relation to the payment of any monthly cash income. Past performance is not a reliable indicator of future performance.
Banks have a relatively inflexible set of lending parameters for assessing CRE loans, which excludes a number of quality borrowers.
These borrowers look to alternative financiers because they need flexibility and are willing to pay a premium in order to do business. Examples include:
- Lending for properties or land that may be outside the bank’s risk appetite due to caps on CRE lending generally or restrictions on certain areas or property sectors.
- Providing additional leverage or more relaxed terms than banks are willing to provide.
- Mezzanine lending (i.e. second mortgages), which is typically only provided by alternative lenders.
- Speed and certainty of funding.
Qualitas will always assess a CRE loan to determine an acceptable interest rate (i.e. pricing) that reflects the acceptable risk, with regard to market pricing at the time.
CRE loans provide exposure to the property market without the downside risk of owning the property.
Due to the capital structure, CRE credit capital is more stable than equity as a source of funding.
CRE credit has the security of a real property mortgage, which provides the lender with the right to sell the property to recoup payment of the loan if the borrower defaults. CRE credit ranks ahead of equity and will always be paid first from sale proceeds.
Payment priority within CRE credit means senior debt (first mortgage) is paid first, and mezzanine debt (second mortgage) is paid second.
The providers of CRE credit (the lender) may also be protected by the equity buffer, which is the difference between the property value and the loan value. The equity buffer will fluctuate with property values, and would need to be eroded completely before the lender is at risk of losing the loan value.
The CRE credit market covers a broad range of loan types including land, investment and construction loans, as well as all property sector asset classes such as residential (multi-dwelling), office, hotel and industrial.
Owning these types of assets directly comes with risks, particularly around valuations, as the capital value of assets can rise and fall in line with market cycles. Income is also variable, based on rental demand and market rates.
On the other hand, the value of a loan and the interest rate are generally agreed at the outset , which in practice makes the income is relatively predictable compared to property ownership. The income generated from the CRE loans (i.e. borrowers paying fees and regular interest payments on the loan) in the QRI portfolio can provide a regular income source which may vary from month to month. However, QRI has consistently delivered monthly distributions since IPO at attractive returns^.
^ The payment of monthly cash income is a goal of the Trust only and neither the Manager nor the Responsible Entity provide any representation or warranty (whether express or implied) in relation to the payment of any monthly cash income. Past performance is not indicative of future performance.
Protecting investors’ capital is our highest priority and our investment processes have institutional-grade governance and a structure similar to that of a bank. This seeks to provide protection against the risk of capital loss throughout the loan investment life cycle – from origination, investment due diligence and approvals to risk management, active asset management and loan repayment.
Our rigorous due diligence and credit assessment focuses on two areas:
- The credit worthiness of the borrower – this includes the borrower’s business operations, track record, management team, company owners, financials and property portfolios.
- The quality of the property – we verify the real property asset including whether it could be resold or leased out, the location and its supporting features and demographics.
Qualitas’ investment processes are different to a bank in the following ways:
- We have greater flexibility to make decisions based on the merits of each loan with regard to QRI’s current risk/return appetite. A bank will often have rigid lending practices which make them more inflexible.
- We undertake a much more proactive approach to asset management to ensure loan performance is managed as appropriate for the risk profile.
- Our equity investment capabilities and in-house property development team allow us to assist the borrower if required to manage difficult loan performance or project issues.
- We undertake individual loan asset reviews every 6-8 weeks, which is a lot more frequent than banks (who only review loan assets once or twice a year).
The Qualitas investment process for CRE credit lending
Two primary CRE credit risks are a loss of loan principal and a loss of loan income. The loss of loan principal is the risk that a borrower cannot repay the loan and the security property value declines and is insufficient to meet the full repayment of the loan. The loss of loan income is the risk that cash flow from property or other borrower sources will be insufficient to pay loan interest and fees that are due to the lender. These risks can be managed through prudent loan-to-value ratio (LVR) levels, a strong focus on senior debt, robust covenants, geographic diversification, sector diversification, short loan tenor, and a solid asset management model.
Please refer to the PDS section 8 on risks related to QRI.
Investor Queries
QRI Manager
Phone: +61 3 9612 3939
Email: qri@qualitas.com.au
Address: L38/120 Collins Street, Melbourne VIC 3000
Unit Registry
Phone: 1300 554 474
Email: qualitas@linkmarketservices.com.au
Website: www.linkmarketservices.com.au
Please view the communications elections for the new options available to security holders as to how you elect to receive your communications.
Should you have a complaint, please access the complaints document for more information.
The information on this website that relates to the Qualitas Real Estate Income Fund ARSN 627 917 971 (Trust) is issued by The Trust Company (RE Services) Limited ABN 45 003 278 831 AFSL 235 150 (Perpetual) as responsible entity of the Trust. This website is prepared by QRI Manager Pty Ltd ACN 625 857 070 (Manager) as the investment manager of the Trust.
The information provided in this website is of a general nature only and has been prepared without taking into account your objectives, financial situation or needs. Before making an investment decision in respect of the Trust, you should consider the current Product Disclosure Statement (PDS) of the Trust and the Trust’s other periodic and continuous disclosure announcements lodged with the ASX which are available at www.asx.com.au. If you require financial advice that takes into account your personal objectives, financial situation or needs, you should consult your licensed or authorised financial adviser.
Neither Perpetual nor the Manager guarantee repayment of capital or any particular rate of return from the Trust. Neither Perpetual nor the Manager gives any representation or warranty as to the reliability, completeness or accuracy of the information contained in this website. All opinions and estimates included in this website constitute judgments of the Manager as at the date of this website and are subject to change without notice. Past performance is not a reliable indicator of future performance.
The PDS and a target market determination for units in the Fund can be obtained by visiting the Fund website qualitas.dev.nucleoserver.com/qri. The Trust Company (RE Services) Limited as responsible entity of the Fund is the issuer of units in the Fund. A person should consider the PDS in deciding whether to acquire, or to continue to hold, units in the Fund.
BondAdviser has acted on information provided to it and our research is subject to change based on legal offering documents. This research is for informational purposes only. This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. The content of this report is not intended to provide financial product advice and must not be relied upon or construed as such. The statements and/or recommendations contained in this report are our opinions only. We do not express any opinion on the future or expected value of any Security and do not explicitly or implicitly recommend or suggest an investment strategy of any kind. BondAdviser is paid a licensing fee from the manager and/or its distribution partner. BondAdviser Asset Management may hold units in the security. This report has been prepared based on available data to which we have access. Neither the accuracy of that data nor the research methodology used to produce the report can be guaranteed or warranted. Some of the research used to create the content is based on past performance. Past performance is not an indicator of future performance. We have taken all reasonable steps to ensure that any opinion or recommendation contained in the report is based on reasonable grounds. The data generated by the research is based on methodology that has limitations; and some of the information in the reports is based on information from third parties. We do not therefore guarantee the currency of the report. If you would like to assess the currency, you should compare the report with more recent characteristics and performance of the assets mentioned within it. You acknowledge that investment can give rise to substantial risk and a product mentioned in the reports may not be suitable to you. You should obtain independent advice specific to your particular circumstances, make your own enquiries and satisfy yourself before you make any investment decisions or use the report for any purpose. This report provides general information only. There has been no regard whatsoever to your own personal or business needs, your individual circumstances, your own financial position or investment objectives in preparing the information. We do not accept responsibility for any loss or damage, howsoever caused (including through negligence), which you may directly or indirectly suffer in connection with your use of this report, nor do we accept any responsibility for any such loss arising out of your use of, or reliance on, information contained in or accessed through this report. © 2023 Bond Adviser Pty Limited. All rights reserved.
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The Zenith Investment Partners (ABN 27 103 132 672, AFS Licence 226872) (“Zenith”) rating (assigned June 2024) referred to in this piece is limited to “General Advice” (s766B Corporations Act 2001) for Wholesale clients only. This advice has been prepared without taking into account the objectives, financial situation or needs of any individual, including target markets of financial products, where applicable, and is subject to change at any time without prior notice. It is not a specific recommendation to purchase, sell or hold the relevant product(s). Investors should seek independent financial advice before making an investment decision and should consider the appropriateness of this advice in light of their own objectives, financial situation and needs. Investors should obtain a copy of and consider the PDS or offer document before making any decision and refer to the full Zenith Product Assessment available on the Zenith website. Past performance is not an indication of future performance. Zenith usually charges the product issuer, fund manager or related party to conduct Product Assessments. Full details regarding Zenith’s methodology, ratings definitions and regulatory compliance are available on our Product Assessments and at Fund Research Regulatory Guidelines
The rating issued October 2023 is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec). Ratings are general advice only, and have been prepared without taking account of your objectives, financial situation or needs. Consider your personal circumstances, read the product disclosure statement and seek independent financial advice before investing. The rating is not a recommendation to purchase, sell or hold any product. Past performance information is not indicative of future performance. Ratings are subject to change without notice and Lonsec assumes no obligation to update. Lonsec uses objective criteria and receives a fee from the Fund Manager. Visit lonsec.com.au for ratings information and to access the full report. © 2023 Lonsec. All rights reserved.