Qualitas Raises more Debt Capital
The listed Qualitas Real Estate Income Fund has raised a further $35M in capital to fund its continuing loan business.
Since inception in 2008, the Qualitas Group has allocated $1.7 billion of debt and equity capital to real estate assets worth approximately $7.3 billion in gross value and currently has approximately $2.0 billion of funds under management.
The Real Estate Income Fund initially raised $231M and has invested or allocated 78% of the funds to 25 separate loans with 80% held with first mortgage security and 20% with a second mortgage security. The weighted LVR of the existing loan portfolio is 64%. In May, the Fund returned 5.13%pa with a forecast rise in July to 7.0%.
The further capital raising is priced at $1.60 per unit (same as initial subscription) and is targeting an 8.0% per annum return net of fees.
The latest Qualitas Fund raising comes amid a softening first half of 2019 pushing the Group to take a more conservative position in its allocation strategy. To date, 82% of the loans in the Fund are to the residential sector with a large exposure to Victoria (77%). The majority of these loans (63%) are also being made to other Funds, mostly managed by Qualitas.
Qualtias state that declining house prices, negative market sentiment and uncertainty around government policy settings has led to lower construction starts and housing approvals. Reduced credit availability due to bank loan processes / policies being tightened has been an ongoing issue for retail lenders and developers.
They also note that the re-election of the LNP Government, the RBA rate cut in June, and a softening of the APRA Loan Servicing Buffer has marked a potential turning point in market sentiment.
As a result of the macro issues, Qualtas believe that senior loans present the deepest pool of opportunities in the current market and they are focused on constructing a portfolio with a lower risk/return profile, than originally anticipated.