Qualitas launches listed commercial real estate debt fund targeting 8% p.a. monthly income

15 October 2018

Media Release, Sydney, 16 October 2018: Real estate investment manager Qualitas has announced the launch of a listed investment trust (Trust) that aims to provide investors with a target return of 8.0% p.a. (net of fees and expenses) with cash distributions paid monthly[i], and generated by commercial real estate loans. The General Offer opens on 16 October[ii] after the cornerstone period achieved commitments in excess of the $150m minimum offer size.

The Qualitas Real Estate Income Fund (ASX: QRI) offers exposure to the commercial real estate finance market by investing directly and indirectly in a portfolio of loans, secured by predominantly first, and on occasion second, real property mortgages as the primary source of security.

The Trust’s investment manager is Qualitas, which has achieved a track record of strong returns and successful management of invested capital since 2008, delivering an internal rate of return (IRR) of 24.8% across its realised real estate loans[iii]. The firm has garnered significant support from both wholesale and institutional investors over that time.

Qualitas’ Group Managing Director, Andrew Schwartz, said, “The Trust offers exposure to the commercial real estate finance market in a listed format, which has been largely inaccessible to direct and SMSF investors to date. This is a significant addition to the listed investment landscape in Australia, and will provide an opportunity for investors to diversify their portfolios with exposure to real estate loans secured by first or second mortgages.”

The Trust is being launched at a time when the demand for non-bank real estate financing is growing, according to Qualitas.

“Recent regulatory changes have forced Australian banks to reassess their exposures to the real estate market. As authorised deposit-taking institutions (ADIs) move towards increasingly selective and conservative credit terms, more flexible forms of finance from alternative lenders are being provided to fill the gap.

“We have observed that demand among borrowers for real estate capital sources is growing, and as a result, high-quality investment opportunities will be accessible to experienced lenders with strong relationships and sound governance practices,” Mr Schwartz said.

Qualitas has extensive experience encompassing all aspects of origination, structuring, negotiation and execution of real estate loans. As the investment manager, the firm will apply its institutional-grade risk management framework to selecting and managing the loans in the portfolio.

“Qualitas uses a highly selective investment filtering and due diligence process to the loans we make. Once they are funded, we take an active approach to identifying and managing any emerging issues over the life of the loan. This approach has been key to our solid track record over the past decade, and we will apply it to all the investments in the Qualitas Real Estate Income Fund,” Mr Schwartz said.

Qualitas has appointed Perpetual Corporate Trust as the Responsible Entity and Custodian for the Trust, due to its well-established compliance and governance structure and its experience in the listed space.

“We have worked with Perpetual since 2014 and they understand our business and our funds well,” Mr Schwartz said.

Perpetual Corporate Trust General Manager – Managed Fund Services, Vicki Riggio said, “Perpetual Corporate Trust is excited to enter into a new deal with Qualitas. We are pleased to be able to expand our remit while continuing to grow our relationship with a longstanding client.

“We’ve seen continued investor appetite for listed funds and have sought to align offerings to address this demand, particularly in the credit space. This deal marks the third ASX-listed investment trust we have launched in the last twelve months and it will allow us to offer retail investors the exposure to commercial real estate, which historically has only been accessible to wholesale investors.”

Evans Dixon is acting as the arranger and lead manager for the transaction and Kardos Scanlan as legal advisers.

– Ends-

Media Contact:

Belinda White

Director, External Affairs, Qualitas

PH: 0421 193 668

Email: belinda.white@qualitas.com.au

 

[i] This is a targeted return only. There is no guarantee that the Trust will achieve its Investment Objective.

[ii] Applications accepted after ASIC’s exposure period, subject to change.

[iii] The historical secured real estate loan track record from inception of Qualitas in 2008 is based on the gross IRRs achieved on actual realised (i.e. repaid) investments as at 30 June 2018. These IRRs have been verified by an independent external auditor.

[iv] The $7.3 billion in gross value is the aggregated value of the real estate assets, as at the date of investment.