Qualitas: fast-growing lender (IPE Real Assets Article)

12 October 2017

Australian lender Qualitas Property Partners is helping overseas investors to diversify into the Australian markets

In the past 12 months, as more global firms seek to establish a foothold in Australia’s debt market, the homegrown Qualitas Property Partners has deepened its footprint.

Qualitas has raised about AUD1bn (€668m) – half of that from offshore investors. But potentially the most significant breakthrough for the Melbourne-based firm was its most recent mandate, believed to be up to AUD500m. IPE Real Assets understands it is for a leading sovereign wealth fund, which other international investors are likely to see as an important endorsement.

Andrew Schwartz, founder and group manager director of Qualitas, says Qualitas has reached a AUD300m hard cap on its first Real Estate Opportunities Fund and has launched its debut AUD500m construction debt fund. Qualitas is also raising capital for its newly launched AUD500m senior debt fund, as well as its seventh private debt fund. So far, it has raised more than AUD200m in its private debt series.

The many trips that Schwartz has made to Asia, Europe and the US have started to bear fruit. International investors now have the message that a debt market is emerging in Australia and that it is a good market for diversification. He believes that, unlike their Australian counterparts, US and European institutions have a better understanding of the risks and rewards of debt investment.

Qualitas began deploying capital from Australian high-net-worth individuals and family offices to the Australian debt market in 2008. However, more capital is being raised outside Australia, to the extent that Qualitas is planning to launch another debt fund next year.

Asked about competition from offshore debt funds, Schwartz says one reason foreign players find it hard to crack Australia is because it is a parochial market. “Debt is not a commodity. Borrowers want to know who the directors are, where they are based, and the agenda of the capital being offered.”

The Australian market can be particularly difficult for global fund managers without a local office. “A few foreign investment managers have entered the market looking for opportunistic-type transactions,” Schwartz says. But he believes the critical ingredient to success is having a long, quality pipeline of deals, which comes from having well-established networks and relationships.

Schwartz says his firm can invest across the capital stack, from debt to mezzanine and preferred equity.
Construction funding is the core of its business, in particular residential development, for which funding is currently hardest to obtain. Schwartz says the firm has access to “high quality” projects and proven developers. He says 75% of the firm’s financing goes into residential development, but each loan is made only after robust risk assessment.

Read the full article here Oct 2017 – IPE – Debt Funds Time to lend Magazine IPE RE