QRI Market and Portfolio Update – September quarter 2021

29 October 2021

We are pleased to present the Qualitas Real Estate Income Fund (ASX:QRI) quarterly update for September 2021 to investors. You can view this latest update in the ASX announcement.

 

|   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 September quarter with a 5.96% p.a. net return and a 5.55% p.a. distribution return achieved (3-months), with no impairments recorded or interest arrears, resulting in a stable NAV.

 

|  September quarter market & portfolio recap

In the continued environment of COVID-19 risks and very low interest rates, which the RBA is expecting to hold for the next few years, APRA is focused on banks maintaining their tight lending standards. These conditions are conducive for further expansion of the private commercial real estate (CRE) debt market as borrowers seek more flexibility and surety in funding, which is also leading to increased alternative lender competition. Ultimately it is borrower demand that underpins the Manager’s current strong CRE debt pipeline of circa $550m.

The Manager continues to see no major distress in the CRE debt market. As the economy navigates its way to a recovery following the easing of lockdown restrictions across major cities, we expect this to have a positive effect across property sectors.

Post the September quarter, a further circa $172m of new capital was raised through an Entitlement Offer and Shortfall Offer, which closed on 22 and 25 October 2021 respectively, which was well supported by new and existing unitholders [1]. The Trust’s total capital is expected to increase to circa $600m upon allotment of the new units [2]. The larger Trust size provides QRI with the relevance and scale to increase its investment activities in the expanding CRE debt market.

Key investment highlights:

  • Strong CRE debt pipeline of circa $550m is well diversified
  • 9 loans total $65m settled, both new and extended, offset by $29m of repayments
  • The Qualitas Land Debt Fund was exited in full.

 

|  September quarter market & portfolio recap

  • 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 distributions [3]
  • Attractive premiums above the current low cash rate
  • Capital preservation, as all CRE loans are secured by real property mortgages [4]
  • Stable net asset value at or above $1.60 per unit 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. 
  • expertise across both real estate debt Domestically focused investments with 100% of the portfolio currently invested in Australia.

 

 

[1] Results of the Entitlement Offer was announced to the ASX on 26 October 2021.
[2] New Units under the Entitlement Offer and Oversubscription Facility will be issued on 29 October 2021. New Units issued under the Shortfall Offer will be issued 4 November 2021.
[3] 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.
[4] Returns are not guaranteed. The premium achieved is commensurate to the investment risk undertaken. Past performance is not a reliable indicator of future performance.

Disclaimer:

This communication has been issued 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” or “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. 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 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 Fund 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.