Qualitas Limited · ASX:QAL
Qualitas — Qualitas Real Estate Income Fund Investor Forum 2023
35 slides from Qualitas's conference presentation, Apr 27, 2023
Slide 1: Qualitas Real Estate Income Fund (ASX: QRI) Investor Day Presentation
The Trust Company Level 18, 123 Pitt Street, P: (02) 9229 9000 (RE Services) Limited Sydney, NSW 2000 F: +61 2 8256 1427 ACN 003 278 831 www.perpetual.com.au ABN 45 003 278 831 AFSL 235150 ASX Announcement Level 3, 530 Collins Freecall: 1800 650 358 Street P: (03) 9665 0200 Qualitas Real Estate Inco
Slide 2: About QRI Manager Pty Ltd
About QRI Manager Pty Ltd QRI Manager Pty Ltd is the Manager of the Trust and is wholly owned by the Qualitas Group (“Qualitas”). Qualitas Limited is an ASX-listed Australian alternative real estate investment manager with circa A$5.8 billion2 of committed funds under management. Qualitas matches gl
Slide 3: Notices and disclaimers
If you require advice that takes into account your personal circumstances, you should consult a licensed or authorised financial adviser. 3. While every effort has been made to ensure the information in this communication is accurate; its accuracy, reliability or completeness is not guaranteed and n
Slide 4: Qualitas Real Estate Income Fund Investor Forum
Qualitas Real Estate Income Fund Investor Forum ASX:QRI
Slide 5: Welcome Remarks
Welcome Remarks Kathleen Yeung Global Head of Corporate Development at Qualitas
Slide 6: Acknowledgement of Country
Acknowledgement of Country Qualitas acknowledges the Traditional Custodians of country throughout Australia and their ongoing connection to land, sea and community. We pay respect to their Elders past and present.
Slide 7: Agenda
Agenda 12:00pm 12:30pm 12:35pm 12:55pm 1:35pm 1:50pm 2:30pm Registration Welcome Qualitas The Rise of Break CRE Private Closing and Lunch Remarks Overview CRE Private Credit at an Remarks Credit Inflection Point – Investment Case Studies Sameer Chopra, CBRE Marco Gattino, Goldfields Group Kathleen Y
Slide 8: Five key takeaways from today
Five key takeaways from today Commercial real estate (CRE) private credit is an emerging asset class supported by secular tailwinds. Investors are increasingly 1 recognising the attractive risk-adjusted returns and capital preservation that the asset class can deliver, particularly in volatile marke
Slide 9: Qualitas Overview
Qualitas Overview Andrew Schwartz Group Managing Director and Co-Founder at Qualitas
Slide 10: An amazing 15-year journey for Qualitas
An amazing 15-year journey for Qualitas Significant growth powered by a track record of performance and unique proposition as one of the pioneers of CRE alternative investing in Australia DEC - 2022 2014 10x 2009 8x $75m $575m $5.8bn Opportunistic equity Senior debt Senior debt Mezzanine Opportunist
Slide 11: Real estate specialist with a proven track record
Real estate specialist with a proven track record Qualitas is one of the largest alternative real estate investment managers in Australia managing predominantly discretionary funds across private credit and private equity 16 funds $71m 54 current investments ~78% of committed FUM is Across income an
Slide 12: Growth in institutional capital raised
Growth in institutional capital raised Private credit strategy continues to drive FUM growth and scalability of our platform INVESTOR COMPOSITION AS OF 31 DECEMBER 2022 Institutional capital composition 2% 7% 1% 1% 14% $5.8bn 76% 27% 76% of FUM FUM 10% 62% Institutional Sovereign wealth funds Privat
Slide 13: Significant exposure to private credit and the residential sector
Significant exposure to private credit and the residential sector in major cities across the east coast of Australia FUNDS UNDER MANAGEMENT1 (BY COMMITTED FUM) FUNDS UNDER MANAGEMENT RISK ALLOCATION2 (BY INVESTED FUM) 9% Senior debt 29% 17% Private credit Mezzanine Private equity 4% Core equity 71%
Slide 14: Why is Australian CRE private credit attractive to institutional investors?
Why is Australian CRE private credit attractive to institutional investors? 29yrs Uninterrupted GDP 13th Largest 12% Population growth 2nd Highest GDP per capita growth1 economy globally2 to 20303 in APAC region2 <1% Vacancy in Sydney, $900bn 6th Most liquid/transacted 1.1% 10yr average impairment r
Slide 15: Why CRE private credit may be attractive to retail investors?
Why CRE private credit may be attractive to retail investors? QRI delivers positive inflation adjusted returns for investors INVESTMENTS WITH RETURNS BELOW INFLATION ARE DETRIMENTAL TO WEALTH GENERATION Inflation adjusted real value of principal and interest of $1,000 investment from Jan-19 Real val
Slide 16: The Rise of CRE Private Credit
The Rise of CRE Private Credit Sameer Chopra, CBRE Marco Gattino, Goldfields Group Nick Consiglio, R.Corporation Moderated by Mark Power, Head of Income Credit at Qualitas
Slide 17: Australia's interest rates and inflation
ECONOMY Australia’s interest rates and inflation Peak inflation in Forecast 4Q 2022, rates 4.5% 9.0% to stabilise 4.0% 8.0% before falling in 3.5% 7.0% 3.0% 6.0% 2024. Interest rates 2.5% 5.0% Inflation 2.0% 4.0% 1.5% 3.0% 1.0% 2.0% 0.5% 1.0% 0.0% 0.0% 1H 21 2H 21 1H 22 2H 22 1H 23 2H 23 1H 24 2H 24
Slide 18: Changes in national cap rates
INVESTMENT Changes in national cap rates Cap rates up 8.5% 6.5% 15bps-50bps 4Q 8.0% 2022. 7.5% 5.5% 7.0% 4.5% CBRE forecasts Cap rates 6.5% 3.5% +25bps- +100bps 6.0% in 2023, 5.5% 2.5% depending upon 5.0% 1.5% asset class. 4.5% 0.5% Mar-13 Jun-14 Sep-15 Dec-16 Mar-18 Jun-19 Sep-20 Dec-21 Mar-23 Jun-
Slide 19: Rent growth has accelerated as vacancy tightens
RENTS 2023 Net effective rent growth Rent growth has Office Industrial Retail Residential CBD Prime Super prime Regional Apartments accelerated as Sydney 4% 10% 5% 14% vacancy tightens Melbourne -1% 15% 5% 14% Brisbane 4% 6% 4% 9% Perth 6% 7% 2% 8% Adelaide -1% 4% 2% 7% Canberra 2% 4% 2% 5% Auckland
Slide 20: Resuming overseas migration could add pressure
ECONOMY Impact of overseas migration Resuming Migrants. Cumulative Population growth 2021-2030 overseas migration 700 600 Australia Canada 9% 14% could add pressure 500 400 New Zealand India 8% 8% in an already tight Switzerland 8% 300 Singapore 7% 200 United States 6% market 100 Brazil Netherlands
Slide 21: Feb migrant arrivals was just 22% below Jan 20
ECONOMY International arrivals Feb migrant Permanent and Temporary Skilled and Work Visas International students arrivals was just 300,000 200,000 180,000 22% below Jan 20 250,000 160,000 levels. 200,000 140,000 120,000 150,000 International 100,000 80,000 student arrivals 100,000 60,000 80% recover
Slide 22: R.Iconic by R.Corporation
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Slide 23: Goldfields 70-hectare Clyde North Land Investment
Goldfields 70-hectare Clyde North Land Investment
Slide 24: CRE Private Credit at an Inflection Point
CRE Private Credit at an Inflection Point Including Investment Case Studies Mark Power Head of Income Credit at Qualitas
Slide 25: Enormous addressable market driven by regulatory change
Enormous addressable market driven by regulatory change CRE credit was dominated by the big four banks 10 years ago, but their market share is shrinking ENORMOUS ADDRESSABLE MARKET1 ADIs REDUCED SHARE OF CRE LENDING IN TOTAL CORPORATE LENDING BY 16% SINCE GFC1,2 $1200bn 60% $1000bn 55% Australian au
Slide 26: Origination network built on deep relationships and reputation
Origination network built on deep relationships and reputation TOP 20 COUNTERPARTIES RELATIONSHIP TENURE WITH QUALITAS1,3 2022 TRANSACTION VOLUME SPLIT2,3 New Counterparties 38% 25% 62% Existing Counterparties Average 4-8 yrs 7 years >8 yrs QUALITAS CREDIT ORIGINATION NETWORK2 75% 130 Counterparties
Slide 27: Qualitas vs. traditional financiers
Qualitas vs. traditional financiers WHAT BORROWERS ARE SEEKING WHAT TRADITIONAL LENDERS PROVIDE WHAT QUALITAS PROVIDES Pricing Low funding costs Dynamically priced returns Syndicated loans with multiple Large single cheque loans. Bespoke Efficiency and certainty - counterparties. Standardised produc
Slide 28: Only mortgage real estate investment trust (MREIT) listed on the ASX
Only mortgage real estate investment trust (MREIT) listed on the ASX QRI was added to the All Ordinaries index on 20 March 2023 Target return – RBA cash rate + 5.0% to 6.5% Fully invested portfolio with diversification2 Delivered attractive risk-adjusted returns1 Well diversified by loan type, locat
Slide 29: QRI loan portfolio as at 31 March 2023
QRI loan portfolio as at 31 March 2023 Senior Senior Mezzanine Senior investment loans / land loans construction loans construction loans residual stock loans Number of loans 15 3 4 18 Total loan amount $238m (40%) $55m (9%) $99m (16%) $180m (30%) Avg. loan amount $33m $46m $31m $25m Weighted avg. g
Slide 30: What does the current trading price imply?
What does the current trading price imply? CURRENT TRADING PRICE IMPLIES A DEEP DISCOUNT IN UNDERLYING SECURITIES VALUES 8% discount to NAV implies 42% fall in underlying real Equity Buffer, Equity Buffer, estate securities values1 and 34% 34% zero recovery from personal guarantees NAV of $1.60 $1.4
Slide 31: Case study 1: Land subdivision refinancing
Case study 1: Land subdivision refinancing ~$24.6m $2.8m 2 year 11.4% 1.1x 65% Initial loan Refinanced to Loan term IRR Multiple LVR Why Qualitas? Potential risks Why we proceeded • Strong relationship • Market/valuation risk • Strong pre-sales • Deep understanding of • Interest servicing risk • Pri
Slide 32: Case study 2: Residual stock facility - JD the Seasons
Case study 2: Residual stock facility - JD the Seasons Seasons by JD Group The Borrower • Experienced Melbourne developer with a strong track record over 20 years • High quality projects with reputable consultants and builders Why Qualitas? • Unique residual stock facility structure that traditional
Slide 33: Closing Remarks
Closing Remarks Kathleen Yeung Global Head of Corporate Development at Qualitas
Slide 34: Five key takeaways from today
Five key takeaways from today Commercial real estate (CRE) private credit is an emerging asset class supported by secular tailwinds. Investors are increasingly 1 recognising the attractive risk-adjusted returns and capital preservation that the asset class can deliver, particularly in volatile marke
Slide 35: Disclaimer
Disclaimer This document has been issued by The Trust Company (RE Services) Limited (ACN 003 278 831) (AFSL 235150) as responsible entity of The Qualitas Real Estate Income Fund (ARSN 627 917 971) (“Fund”) and has been prepared by QRI Manager Pty Ltd (ACN 625 857 070) (AFS Representative 1266996 as
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