Australian alternative real estate investment manager Qualitas has received a mandate from an unnamed global institutional investor to invest up to A$1bn (€614m) in the firm’s income credit strategy.

Qualitas has formed a partnership with the institution to invest in tranches, of which A$220m is activated and available for immediate deployment into two residual stock loans (RSLs) for close to A$109m. The balance (A$111m) will be invested across all commercial real estate sectors.

The remaining A$780m was subject to further approvals and conditions and there was no certainty that it would be activated in whole or in part, Qualitas said. Qualitas will co-invest up to A$30m over the life of the A$1bn mandate.

Andrew Schwartz, group managing director and co-founder of Qualitas, said: “RSLs present compelling risk-adjusted returns, given the exposure level is typically at a material discount to underlying valuations, with a backdrop of strong residential demand dynamics.”

Mark Power, Qualitas’ head of income credit, told IPE Real Assets: “The new fund is investing in similar asset classes to what we have invested previously, being residual stock and investment loans together with predevelopment land funding.”

Power explained that a residual stock loan is essentially a credit line secured against recently-completed but unsold residential apartments. 

“Banks generally do not provide stock loans because it is not income-producing property and very capital consumptive for their own capital provisioning risk model. What that means for alternate lenders such as Qualitas is the opportunity to get strong returns in that part of the market for the amount of risk that we take onboard.”

The partnership could broaden to include other investors as the fund is bedded down, Power said. “Investors in income-credit strategies are traditionally invested in real estate equity and they are now looking at debt because the return for the risk is attractive in Australia at the moment.”

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