PGIM Real Estate increases exposure to Australian real estate debt
PGIM Real Estate has provided AUD70m (€46.8m) in senior debt for a commercial redevelopment in Brisbane
The US-based fund manager is supporting an AUD110m riverfront project in the city’s central business district.
It will be PGIM Real Estate’s single largest debt exposure in Australia.
Steve Bulloch, PGIM Real Estate’s managing director and head of Australia, told IPE Real Estate: “We originally approached this deal as a potential equity partner.
“We really like the real estate story and the consortium involved with the project.”
The project, known as Howard Smith Wharves, is being undertaken by the HSW Consortium, which is the developer and will be the operator of what it hopes will be a “world-class” recreation, lifestyle, events and tourism destination for Brisbane.
Bulloch said that, when PGIM Real Estate began talking to HSW Consortium, it became clear that want they really wanted was a debt funding solution.
“It is a complex project, with lots of moving parts, and what it needed was an equity market investor to play a different role in the capital stack,” Bulloch said, adding that traditional Australian banks are funding a hotel development on the 2.7-hectare site.
Bulloch told IPE Real Estate that PGIM Real Estate has been investing in the Australian real estate debt market since 2012 – a year after it first began investing equity in Australia’s property market.
Its debt exposure is primarily to residential apartment projects in Sydney, with commitments ranging upwards from AUD25m as part of a portfolio of “a few hundred millions” in Australia.
“If we like the projects and the sponsors,” he said, “our approach is that we would be happy to participate in an equity capacity – but if it is more appropriate for us to play in the debt space, we will do that.”
Bulloch added: “You need to be quite flexible in terms of giving the sponsors what they are looking for – but we are happy to take some risks and get rewarded along the way for the right deals.”