A growing appetite among institutional and high net worth investors for senior secured real estate debt has helped Qualitas to raise over $100 million for its latest debt fund, the $500 million open ended Qualitas Senior Debt Fund.
The real estate fund manager said it has captured significant investor interest for the open-ended fund, which invests in first-ranking secured loans for real estate assets.
“There is a growing need for alternative financiers who can lend outside of the big banks’ increasingly narrow parameters. As banks have continued to limit their credit appetite, the opportunity for capital providers such as Qualitas has grown substantially,” Qualitas Group Managing Director, Andrew Schwartz said.
“As an established player with a ten-year track record, Qualitas is ideally positioned to take advantage of this opportunity. Through our deep and long-standing relationships, we can access a pipeline of quality deals for the fund. In fact, we’ve already committed all of the capital raised in our first close to a number of quality assets.
“This means we are already delivering strong, risk-adjusted returns to investors, in line with our target return.”
The Senior Debt Fund makes monthly distributions and targets a return of 400-600 basis points above the three-month BBSW rate, while offering strong capital protection thanks to first-ranking mortgages over each loan.
Mr Schwartz said, “The risk and return profile of the Senior Debt Fund is attractive to private and institutional investors seeking real estate that has low correlation to equities including REITS, in a global environment of high asset valuations.”
Across its Funds, Qualitas has seen particular interest from offshore institutions, attracted to Australia’s market dynamics. Mr Schwartz explains that Australian real estate loan covenants are relatively favourable compared to the US and Europe.
“Real estate debt is an established institutional asset class in other countries, but there’s a lot of capital looking for a home in those markets, and this competition has pushed down risk-adjusted returns.
“In Australia, risk is lower and returns are higher for comparable investments, so we have fielded a lot of interest from global investors.
“Offering a fund with a lower risk profile has also attracted new local investors to the firm, particularly those who require a steady, low-risk income stream,” Mr Schwartz said.