Qualitas wins Middle Eastern backing for real estate plays

The mandate, worth potentially as much as $1.7bn, is one of the largest awarded in Australia by the oil rich emirate, which triggered a hefty spike in Qualitas’ share price.

Qualitas strikes a deal with Middle Eastern sovereign fund the Abu Dhabi Investment Authority that could see the ASX-listed company awarded mandates of up to $1.7bn. Picture: iStock

Qualitas shares soared after the property finance house struck a deal with Middle Eastern sovereign fund the Abu Dhabi Investment Authority that could see the listed company awarded mandates of up to $1.7bn.

Qualitas will start with an initial $700m from the fund which it will pour into real estate debt investing at a time when the tougher environment for developers is throwing up more opportunities for lending and interest rates are rising.

The arrangement is structured so ADIA could end up taking a stake of close to 10 per cent in Qualitas itself, but only if it awarded the local company more mandates amounting to about $1bn.

Qualitas shared rocketed as much as 25 per cent, before closing up 20.6 per cent at $2.02 in a higher market on Monday.

The deal vindicates the 2021 move by the Andrew Schwartz-led Qualitas to list on the Australian Securities Exchange, with the mandate from ADIA one of the largest ever it has made in Australia.

It could also be well timed as major banks take a cautious approach towards property and some overseas lenders pull back to their home markets as a recession looms. ADIA has also given Qualitas a wide ranging mandate, giving it the flexibility to invest.

“Its exactly the right time to invest in private credit,” Mr Schwartz said. At times of uncertainty about equity valuations, private credit was the right place to be, he said. ”It makes more sense when interest rates are going up and risk premiums are going up as well.”

Mr Schwartz said ADIA had both chosen Qualitas for the “significant mandate” and had backed its belief in the business with options to acquire a meaningful stake in the company.

“We believe this decision is testament to the expertise and quality of Qualitas’ in-house origination, credit assessment and asset management skills in the Australian commercial real estate [CRE] private credit market,” he said.

“The award of the mandate is timely given the growing opportunities for experienced investors in Australian CRE private credit as the banks continue their retreat from the CRE sector,” Mr Schwartz said.

“This mandate highlights the benefits of Qualitas’ scalable platform and solidifies our position as a trusted Australian alternative real estate investment manager benefiting from robust relationships with global institutional investors, strong balance sheet capacity, and a market leading, best-in-class investment and operational team,“ Mr Schwartz said.

The $700m mandate will be carried out through the newly created Qualitas Diversified Credit Investments, which will have a wide investment scope with a focus on the growing Australian CRE private credit market and senior credit strategies. Qualitas is co-investing 5 per cent or $35m in the new vehicle.

Qualitas said the mandate is well-timed to coincide with the current dislocation in global markets, driving increased volatility and hesitancy by traditional funding sources to deploy capital.

Winning the mandate boosted Qualitas’ total committed funds under management to about $5bn focused on commercial real estate credit and equity opportunities.

The options granted to ADIA mean it may acquire a stake of up to 9.99 per cent. They will be exercisable in tranches if ADIA increases its investment mandates with Qualitas within the next two years.

Qualitas’ financial adviser was Macquarie Capital.