ASX ANNOUCEMENT: QRI Market and Portfolio Update – June quarter 2021
27 July 2021
We are pleased to present the Qualitas Real Estate Income Fund (ASX:QRI) quarterly update for June 2021 to investors. You can view this latest update in the ASX Announcement.
Nick Bullick (Director Real Estate & Portfolio Manager of QRI) presents QRI’s latest performance and the Qualitas house view on the commercial real estate (CRE) debt market having regard to a macroeconomic backdrop of ongoing COVID-19 risks.
Investment objectives met
The Trust met its investment objectives of Target Return (RBA Cash Rate + 5.0% to 6.5%), portfolio diversification and capital preservation during the quarter.
The Manager is pleased to deliver attractive risk-adjusted returns for a well diversified loan portfolio that is predominantly senior first mortgage. The Trust’s performance was strong for the June quarter with a 6.11% p.a. net return and a 6.15% p.a. distribution return achieved (3-month) in line with the distribution guidance provided previously of at least circa 6.00%p.a. until 30 June 2021.1
The loan portfolio continues to perform in line with the investment objectives and there were no impairments recorded or interest arrears, resulting in a stable NAV.
June quarter market & portfolio recap
The Manager is seeing no major distress in the CRE debt market. Generally, these conditions in Australia are more favourable than offshore markets which has led to increased investment activity from both domestic and offshore alternative lenders in recent months.
The Manager however remains disciplined with investment selection and will not compromise on transactions which present material credit risks, ensuring strong sponsor and property quality.
The Manager is closely watching the market more generally in light of the recent lockdowns in Sydney and Melbourne and can confirm there is only a 10% portfolio exposure to construction loans for projects still under construction, which are all located in Melbourne where construction sites have not closed. The Manager is comfortable that each construction loan has adequate contingencies and equity to cover extended delays from the risk of lockdown should this occur in Melbourne.
Key investment highlights:
- Raised new capital from $12.7m unit purchase plan offer closed on 29 June 2021 which was well supported by existing unitholders.
- 8 new loans worth $189m settled which were funded by new capital and $98m of repayments.
- Repayments included the full redemption of the $26.5m Arch Finance Warehouse Trust note investment which the Manager elected to exit to align with the strategy to increase the Trust’s exposure to direct loan investments.
Trust benefits to Investors
QRI seeks to continue delivering the following benefits to investors who are seeking attractive sources of income and capital preservation:
- Reliable income in the form of regular monthly cash distributions2
- Attractive premiums above the current low cash rate3
- Capital preservation, as all CRE loans are secured by real property mortgages
- Stable net asset value at or above $1.60 with no impairments since the IPO, supported by a robust loan valuation process
- CRE debt asset class differentiation managed by a local property specialist with expertise across both real estate debt and equity
- Domestically focused investments with 100% of the portfolio currently invested in Australia.
27 July 2021
[1] As per the distribution guidance disclosed in the QRI monthly reports (April 2021, May 2021, June 2021).
[2] The payment of monthly cash income is a goal of the Trust only and neither the Manager or the Responsible Entity provide any representation or warranty (whether express or implied) in relation to the payment of any monthly cash income.
[3] Returns are not guaranteed. The premium achieved is commensurate to the investment risk undertaken.
Disclaimer
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) (Fund) 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, 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 and assess 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.