A number of foreign institutional investors are moving into Australian real estate debt for the first time through Melbourne-based Qualitas.

The Australian fund manager has raised AUD500m (€334m) for its first construction debt fund. All the equity has come from offshore investors.

Andrew Schwartz, group managing director of Qualitas, told IPE Real Estate that the participants have experience in investing in real estate debt globally but had yet to enter the Australian market.

“They understand very well how the debt market works,” he said.

Such is the level of interest, Schwartz said, that Qualitas is preparing to launch a follow-on fund of a similar size in the first quarter of next year.

He said the closed-ended fund had been created to fill a gap created by a pull-back in bank lending in Australia. The new fund will provide capital at a loan-to-value ratio of up to 75%.

Schwartz said Qualitas was “very active” in the Australian construction finance market.

“As a result, we have developed strong relationships with high-quality developers and builders – and consequently access to high quality projects,” he said, adding that 75% of the firm’s financing goes into residential development.

The maiden construction fund is already committed to provide loans of up to AUD125m for residential and commercial development projects. 

Asked about recent negative commentary on the Australian residential market, which many believe has peaked, Schwartz said: “Australia is not one single market. It has a number of sub-markets. The construction cycle has peaked in Melbourne and Sydney.

“Building approvals and commencements have started to slow in these markets, but this is a function of a market finding its equilibrium as a result of the pullback by banks.

“With Australia’s growing population and the very tight vacancy rates in Melbourne and Sydney, we are especially focused on these markets to provide much-needed debt capital to quality projects.”

Qualitas had provided loans to Australia’s development industry for a long time, he said, and was yet to experience a default, he added.

The company is currently raising capital for its seventh private debt fund and an opportunity fund. 

Although it has raised several single-asset opportunity funds, the latest opportunity fund will be its first commingled vehicle. It is expected to reach a hard cap next month, raising AUD$300m, above its original target.

It has raised more than AUD200m for its series of private debt funds.

In anticipation of growing its debt business, Qualitas has hired former bankers Mark Power and Gil Norwood as directors.