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Qualitas presented its financial results for the six months to 31 December 2022 revealing a record capital deployment of $1.76b and continued growth in FUM and earnings.
Group Managing Director and Co-founder Andrew Schwartz said “During 1H23, we grew FUM by $1.5 billion from both existing and new investors which includes three large new mandates. We have experienced strong deployment primarily attributed to traditional financiers retreat from the commercial real estate (CRE) sector, which allows us to be cautious and selective in our investment decisions. We have sought to maximise invested capital via new warehouse facilities, utilising the strength of the Qualitas balance sheet to optimise the invested capital for our funds and to benefit from the deployment opportunities currently presenting.
Scalability of our platform is evidenced by the significant increase in the average gross investment size. Qualitas’ ability to transact at these investment sizes has enabled us to attract and finance premium opportunities not accessible to other market participants, providing us with a very strong competitive advantage in both debt and equity financing.”
Total FUM rose from $4.3 billion in FY22 to $5.8 billion in 1H23, representing a 35% increase on FY22 and a compound annual growth rate (CAGR) of 38% since Qualitas’ inception in 2008. Qualitas now manages 16 active funds across CRE private credit and equity strategies, including the ASX-listed Qualitas Real Estate Income Fund (QRI).
Strong growth momentum of FUM demonstrates the platform’s scalability, translating into the expansion of Group EBITDA margin, on a pre performance fee basis, by 6% on 1H22 to 44%.
The market expects interest rates to continue to rise in the first half of 2023. The lagged impact on CRE is likely to be seen in the second half of the calendar year, and could lead to further withdrawals of liquidity in the market and asset value recalibration. The observed easing of construction cost increases should assist developers with restarting projects that may have been put on hold.
As an experienced investor throughout the cycle, Qualitas is expected to benefit from these conditions.
Mr Schwartz said “CRE private credit is gaining momentum particularly with offshore institutional capital providers, given the benefits of a rising interest rate environment. The sector also provides shelter from the impact of inflation. Our funds and balance sheet capital returns can both benefit from rising interest rates.
Qualitas’ range of private credit, build to rent, inflationary hedge and opportunistic investment thematics illustrates the flexibility and resilience of our business model through market cycles”, said Mr Schwartz.
“The current market conditions that have seen the moderating of competition, coupled with the increased hesitancy of traditional funding sources to deploy capital in the CRE sector, will continue to be favourable to Qualitas as it encourages ongoing demand for our funds at attractive risk adjusted pricing. As an innovative, experienced, and well-capitalised CRE investment manager, we believe we are strongly positioned to select the very best investment opportunities.
Institutional investors are seeking to increase allocations to private credit, and we believe wholesale and retail will follow suit. We expect continued strong FUM growth, building on the increasing interest of both domestic and offshore investors seeking to reallocate their portfolios towards alternative investments and specifically to CRE.”
Qualitas reaffirms no change to FY23 guidance:
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