Qualitas Limited · ASX:QAL
Qualitas — Investor Day (October 2022)
103 slides from Qualitas's investor day presentation, Oct 27, 2022
Slide 1: Qualitas Limited – 27 October 2022 Investor Day Presentation
ASX Announcement Qualitas Limited (ASX: QAL) 27 October 2022 Qualitas Limited – 27 October 2022 Investor Day Presentation Qualitas Limited (ASX: QAL) (Qualitas or Company) is today holding an Investor Day in Melbourne, Australia commencing at 12.00pm (AEDT). Enclosed are the presentation materials.
Slide 2: About Qualitas
About Qualitas Qualitas Limited ACN 655 057 588 (Qualitas) is an ASX-listed Australian alternative real estate investment manager with approximately A$5.33 billion of committed funds under management. Qualitas matches global capital with access to attractive risk adjusted investments in real estate
Slide 3: Qualitas (ASX:QAL) Investor Day
Qualitas Investor Day (ASX:QAL) Presentation 27 October 2022
Slide 4: 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 5: Agenda
Agenda 12:00pm 12:35pm 12:40pm 1:25pm 1:50pm 2:10pm 2:25pm Registration Welcome Investing in the Future of Building a Global Capital Flows – Break From Niche to and Lunch Remarks Australia’s Real Estate Sustainable Future Momentum Across Mainstream - Real Alternative Investment Estate Private Credit
Slide 6: Investing in the Future of Australia’s Real Estate Market
Investing in the Future of Australia’s Real Estate Market Andrew Schwartz – Group Managing Director and Co-Founder 4
Slide 7: Five key takeaways from today
Five key takeaways from today Unique ecosystem built for significant addressable market with limited 1 Our differentiation replicability and high barriers to entry High conviction in the multi-dwelling sector with long-term valuation supported 2 Fund target market by anticipated decade long undersup
Slide 8: An amazing 14-year journey
An amazing 14-year journey Significant growth powered by a track record of performance and unique proposition as the pioneer of CRE alternative asset management in Australia OCT - 2022 2014 9x 2009 8x $75m $575m $5.3bn Opportunistic equity Senior debt Senior debt Mezzanine Opportunistic equity Equit
Slide 9: Right place, right time, right talent
Right place, right time, right talent Inflection point for Qualitas underpinned by an evolving industry and macroeconomic environment Strong secular tailwinds Significant credit exposure Significant addressable market with Fast growing – YTD FY23 deployment of limited competition $1.03bn1 Predominan
Slide 10: Key economic indicators in Australia
Key economic indicators in Australia 2.60% Cash rate target 3.6% Economic growth 7.3% Inflation 3.5% Unemployment rate Source: RBA as at 10 October 2022, inflation shown as at 26 October 2022. 8
Slide 11: Elevated volatility and uncertainty in the market
Elevated volatility and uncertainty in the market Increased supply in the labour market is required to break the inflation and interest rate cycle Interest Inflation rates Higher Higher Reduced Supply chain Geopolitical interest rates inflation liquidity disruption instability Mortgage Enterprise an
Slide 12: Increasing pressure on residential supply and affordability
Increasing pressure on residential supply and affordability POPULATION GROWTH VACANCY RATES AT APARTMENT COMPLETIONS PRICE GAP BETWEEN BANKS’ LENDING CAPACITY SET TO RISE FAST ALL TIME LOWS AT 10-YEAR LOWS HOUSES AND UNITS TO DECREASE AT RECORD HIGH 31k 2.0x 2.2% -40% 195K P.A. MIGRATION CAP1 19k 1.
Slide 13: How does the current dynamic feed into key investment thematics?
How does the current dynamic feed into key investment thematics? Qualitas is well-positioned in the current economic cycle Long term growth underpinned by regulatory changes1 Private credit combined with benefits from rising interest rates and widening risk margins Exposure to megatrends – instituti
Slide 14: How does our FUM weather changing dynamics in the market?
How does our FUM weather changing dynamics in the market? Our portfolios are well positioned in the current environment of high inflation and rising interest rates Funds under management1 (FUM) FUM and fee impact of FUM benefits from rising 5% ~77% interest rates 6% 12% of FUM exposed to changing <1
Slide 15: Deep CRE market with significant opportunity to grow
Deep CRE market with significant opportunity to grow Each of our strategies has significant runways to grow How do we grow from here? North Sydney – larger deployment QDCI – larger mandate • c.$600m, one of the largest • $700m from Abu Dhabi Investment alternative financing credit Authority (ADIA) w
Slide 16: Outlook and guidance
Outlook and guidance FY23 outlook FY23 guidance • Whilst we have experienced a strong first quarter of new FUM Estimated range and capital deployment, we are heading into a more cautionary environment with a further 8 months to go in the financial year $30m - $33m • We have a solid basis for our fun
Slide 17: Five key takeaways from today
Five key takeaways from today Unique ecosystem built for significant addressable market with limited 1 Our differentiation replicability and high barriers to entry High conviction in the multi-dwelling sector with long-term valuation supported 2 Fund target market by anticipated decade long undersup
Slide 18: Driving Growth in a Volatile Environment
Driving Growth in a Volatile Environment Mark Fischer – Global Head of Real Estate and Co-Founder 16
Slide 19: Growth and value in cautionary times
Growth and value in cautionary times 1 What we do Our through-the-cycle investment process and approach Scalability through combining Qualitas’ unique proposition with long-term 2 Growth drivers investment thematics Client led investment model with strong agility to respond to rapidly changing 3 Ide
Slide 20: Qualitas investment approach
Qualitas investment approach Maintaining a consistent investment philosophy is the key to our success QUALITAS INVESTMENT APPROACH End occupier demand driven Investments supported by long- The CRE sector is an imperfect asset market – is this relevant to the end lasting thematic with strong customer
Slide 21: Qualitas four key strategies
Qualitas four key strategies Currently 15 active funds across 4 key strategies KEY INVESTMENT STRATEGIES Qualitas Credit Equity Income Total Return Income Total Return QRI QCDF I & II QFIF QREOF I & II QSDF QDCI QDREF BTR Equity Senior Debt SMA Arch Finance* Other Credit Other Equity * Wholly owned
Slide 22: Scalability through combining Qualitas’ unique proposition with long-term investment thematics
Scalability through combining Qualitas’ unique proposition with long-term investment thematics Where is the industry going and What are we successful at? what are we focusing on? Unparalleled origination network • Larger individual investment sizes across credit and equity Defensive moat around Trav
Slide 23: Credit strategy in the current environment
Credit strategy in the current environment HOW HAVE WE GROWN? STRUCTURAL GROWTH DRIVERS HOW DO WE CONTINUE TO GROW? Deployment (A$m) Institutionalisation of CRE private credit Income credit: • Open-ended funds 1,449 Rising interest rates and widening credit margins • Larger investments in passive as
Slide 24: Equity strategy in the current environment
Equity strategy in the current environment HOW HAVE WE GROWN? STRUCTURAL GROWTH DRIVERS HOW DO WE CONTINUE TO GROW? Deployment (A$m) Long term supply shortage – BTR Income equity: • Long duration – BTR 483 High demand for inflation-proof CRE assets • Sale and lease back Attractive opportunities emer
Slide 25: Look beyond the headlines
Look beyond the headlines MARKET ENVIRONMENT CONDUCIVE TO OUR GROWTH Inflationary hedge – Australian real estate Our investing benefits when liquidity is at a premium – liquidity distress ≠ fundamental distress Short term recalibration of values is happening – 77% of CPI CAGR 5.0% CPI CAGR 2.5% FUM
Slide 26: Strong start to FY23
Strong start to FY23 Significant deployment in CRE private credit in first quarter of FY23 and deep investment pipeline Qualitas deployment profile over time 7% 5% 19% 32% 20% FY15 FY22 $1,931m 68% $1,732m1 49% 216 Senior debt Equity core $1,230m 490 Equity opportunistic Mezzanine $911m $864m $832m
Slide 27: Key takeaways
Key takeaways Why Qualitas? Market opportunities for growth Proven investment approach with strong Income credit track record • Increase passive assets and recurring fees and reduce management intensity Total return credit Extensive local network and recognition combined with in-depth CRE expertise
Slide 28: Building a Sustainable Future
Building a Sustainable Future Jason Rackley – Head of Transaction Risk Anna Wagner – Head of People & Culture Moderated by Tim Johansen – Global Head of Investment and Funds Risk 26
Slide 29: Our ESG beliefs and priorities
Our ESG beliefs and priorities Long-term temperature goal Mitigate climate change Qualitas strongly endorses strengthening the Qualitas encourages borrowers to invest in real global response to climate change and is assets with a strong sustainability focus, as an committed to reducing emissions as
Slide 30: Our core values underpin our success
Our core values underpin our success Our success since establishment 14 years ago is a true reflection of our team, their levels of engagement and our five core values which they uphold Respect Collaboration Entrepreneurship Treat all stakeholders fairly and Build collaborative relationships Encoura
Slide 31: Global Capital Flows – Momentum Across Alternative Investment Opportunities
Global Capital Flows – Momentum Across Alternative Investment Opportunities Dean Winterton – Global Head of Capital 29
Slide 32: Global capital flows: summary
Global capital flows: summary 1 Our current client base and its evolution over time 2 Qualitas – critical success factors and why Australia? 3 Unpacking the global investor opportunity set 4 Key client channels and current initiatives 30
Slide 33: Evolution of Qualitas client composition
Evolution of Qualitas client composition Ongoing support from institutional clients accelerated since IPO with clients both re-committing their investments and committing capital across multiple fund strategies 2012 TO 2022 - CLIENT COMPOSITION BY FUM1 FUM BY CLIENT GEOGRAPHY2 2012 2022 Institutiona
Slide 34: Supported by long term clients
Supported by long term clients Qualitas has a base of loyal institutions with repeat investments TOP 10 CLIENTS BY TOTAL COMMITMENT SINCE 20131,2 CASE STUDY: GLOBAL INSTITUTIONAL CLIENT 1,550 Deployed capital ($m) Private Top 10 9% investors 855 Avg relationship committed capital 566 ~5yrs Instituti
Slide 35: Why Qualitas?
Why Qualitas? OUR CRITICAL SUCCESS FACTORS Positive view Existing 14 year Breadth and Residential by asset clients as track record capability expertise consultants referees WHICH UNDERPIN KEY BARRIERS TO ENTRY • Scale – ability to meet the investment needs of large global institutional clients • Res
Slide 36: Investing in commercial real estate in Australia – client feedback
Investing in commercial real estate in Australia – client feedback The opportunity that is Australia… Many institutional investors already have real Good diversifier with low correlation to other estate investments in Australia – credit is developed markets an extension Macro environment making risk
Slide 37: The global opportunity set
The global opportunity set ASSET OWNERS GLOBALLY CONTROL USD $175 TRILLION1 MORE THAN HALF OF INSTITUTIONAL INVESTORS EXPECT TO INCREASE TARGET ALLOCATIONS BY 20252 Insurance Funds Current asset class allocation 40.3 Pension Funds 60.6 13.8% 6.2% 10.1% 5% 8% 15% 17% Qualitas 25% opportunity 33% set
Slide 38: The global opportunity set by market
The global opportunity set by market AUSTRALIAN SUPERANNUATION INDUSTRY (PENSION) GLOBAL PENSION FUNDS1 A$78tn 92% A$3.3tn Total AUM2,3 of which Is concentrated in the markets below Total AUM1 Canada AUM % Self-Managed Industry, Public UK Super Funds Sector and (SMSF) Corporate Funds Netherlands 26%
Slide 39: Qualitas client engagement
Qualitas client engagement Private capital Advised distribution Domestic institutional Offshore institutional Dealer groups Oreana Asset consultants, CIOs, internal Investment teams Interprac (MLC) Group and investment committees Decision Word of mouth Frontier Albourne Platforms Netwealth Macquarie
Slide 40: Key takeaways
Key takeaways Deep real estate knowledge and expertise Large global opportunity set to drive growth Repeat commitments from institutional clients Client led approach 38
Slide 41: From Niche to Mainstream – Real Estate Private Credit
From Niche to Mainstream – Real Estate Private Credit Mark Power – Acting Head of Income Credit Funds & Head of Build-to-Rent Debt Fund Samantha Khalid – Director, Real Estate Execution and Analysis 39
Slide 42: Commercial real estate (CRE) private credit
Commercial real estate (CRE) private credit Transition from niche to mainstream Borrowers of Regulation of Types of Generating CRE private Loan types the asset class investors returns credit 40
Slide 43: Robust dynamics supports CRE debt market growth
Robust dynamics supports CRE debt market growth CRE transaction volume remained strong, despite rising interest rates LAST TWELVE MONTH (LTM) AUSTRALIAN CRE TRANSACTION VOLUMES1 $60bn COVID-19 period Exceeding pre-COVID-19 levels $50bn $40bn $30bn $20bn Jun-2017 Jun-2018 Jun-2019 Jun-2020 Jun-2021 J
Slide 44: CRE private credit at an inflection point
CRE private credit at an inflection point CRE credit was dominated by the big four banks 10 years ago, but they have been retreating BIG FOUR BANKS REDUCED CRE MARKET APRA ENFORCES STRINGENT REQUIREMENTS QUALITAS’ COMPETITIVE ADVANTAGES SHARE AS % OF TOTAL ADI EXPOSURE IN LAST ON CRE LENDING 10 YEAR
Slide 45: Where does CRE credit sit on the risk and return spectrum?
Where does CRE credit sit on the risk and return spectrum? RANKS HIGHER THAN EQUITY IN SENIOR CRE CREDIT ON THE RISK AND RETURN SIGNIFICANT PORTION OF QUALITAS’ CRE THE CAPITAL STRUCTURE SPECTRUM* CREDIT EXPOSURE AT LOWER END OF RISK SPECTRUM* Repaid first 60% of QAL Fee Earning FUM is in senior CRE
Slide 46: Unique CRE credit platform with strong track record
Unique CRE credit platform with strong track record Sophisticated risk grading model, deep CRE credit experience and separate risk and credit teams enables our strong track record of robust risk assessment TRANSACTION SCREENING PROCESS TRANSACTION SCREENING PROCESS All originated opportunities • Ser
Slide 47: Case study: funding gap as traditional financiers retreat
Case study: funding gap as traditional financiers retreat Investment debt – commercial office LVR < 30% ICR > 1.0x ~$70m Covenants Covenants Investment amount Inner city location, low leverage, repeat Sponsor, 7.7% 1.12x 3 years income generating asset Gross IRR Multiple Investment duration Forecast
Slide 48: Case study: senior debt residual stock
Case study: senior debt residual stock Residual stock facility – residential ~$60m 3 year Investment amount Investment duration Inner city location, close to transport and amenity, LVR < 65% 1.16x 8.2% repeat Sponsor, quality Multiple Gross IRR stock Covenants Forecast returns Forecast returns 46
Slide 49: Key takeaways
Key takeaways Established private credit platform with deep expertise in CRE asset sectors Strong borrower relationships across origination team Focus on increasing transaction size for assets with lower risk profiles Market share continues to grow for alternative financiers 47
Slide 50: Flexible Financing Solutions for Construction Debt
Flexible Financing Solutions for Construction Debt Gil Norwood – Head of Construction Debt Fund Jeremy Fyfe – Director, Real Estate 48
Slide 51: Australian construction sector today
Australian construction sector today CRUCIAL INDUSTRY IN LOAN MARKET RECOVERING STRONG GOVERNMENT KEY CHALLENGES THE AUSTRALIA’S ECONOMY FROM COVID-19 DOWNTURN SUPPORT INDUSTRY FACES Construction is $32bn Construction cost Australia’s increases are at ALL TIME HIGHS6 4th largest employer Tight labou
Slide 52: The life cycle of a typical project
The life cycle of a Planning typical project • Identify/source sites • Preliminary feasibility • Product development – planning permit Completion Marketing • Prepare buyers for settlement • Marketing and sales strategy • Lender repaid first • Off-the-plan sales v • Initial construction costings v Si
Slide 53: Qualitas undertakes extensive analysis and assessment
Qualitas undertakes extensive analysis and assessment SPONSOR PROJECT BUILDER • Experience • Geographic surrounds • Financial standing • Financial standing • Feasibility • People • Contagion risks • Product • Programme 51
Slide 54: Risk managed through extensive due diligence and bespoke structuring
Risk managed through extensive due diligence and bespoke structuring Target developer/builder with Project profit and equity track record Cost overrun allowance Additional top up security Cost escalation allowance Verification of sub-contractor payments Minimum 5% performance bond Builder profit – m
Slide 55: It’s not always about price
It’s not always about price WHAT BORROWERS ARE SEEKING WHAT TRADITIONAL LENDERS PROVIDE WHAT QUALITAS PROVIDES Low funding costs Low funding costs Dynamically priced returns Efficient and reliable execution (minimum no. of counterparties) - Syndicated loans with multiple counterparties Large single
Slide 56: Case study 1: funding gap as traditional financiers retreat
Case study 1: funding gap as traditional financiers retreat 200 apartments Nov 2020 Jun 2022 ~$80m 70% 70% Facility Loan to Debt cover pre- Financial close Repayment limit value ratio sales at underwrite Investment thesis Why Qualitas Outcome • Sponsor track record • Situational • Repayment from pre
Slide 57: Case study 2: restructure
Case study 2: restructure 350 apartments Dec 2020 Dec 2022 ~$130m 70% 60% Facility Loan to Debt cover pre- Financial close Forecast repayment limit value ratio sales at underwrite Investment thesis Risk event Qualitas response Outcome • Sponsor track record In late 2021 the • Immediate escalation to
Slide 58: Key takeaways
Key takeaways Qualitas has an established construction debt platform with deep expertise in CRE Challenges and problem solving is in our DNA and is one reason why we are present Continued re-balancing of market share presents us with the opportunity for growth Know your market. Evolve or risk irrele
Slide 59: Capturing the Full Spectrum of Opportunities for CRE Debt
Capturing the Full Spectrum of Opportunities for CRE Debt Russel Brennan – Chief Executive Officer, Arch Finance 57
Slide 60: Who is Arch Finance?
Who is Arch Finance? • Full-service lender for smaller first mortgage commercial property loans up to $6m • Manager of Peer Estate (Peer-to-Peer lender) • Arch Finance (Arch) is funded through the Arch Finance Warehouse Trust (AFWT) • Owned by Qualitas since 2009 and represents ~11% of QAL normalize
Slide 61: How is Arch different from Qualitas?
How is Arch different from Qualitas? Smaller loans First mortgage loans • Average loan size of ~$2 million • AFWT strictly first mortgage investment (ability to lend up to $6m) loans • Volume focused business with • Peer Estate predominantly first mortgage 70 – 80 loan closures each year loans Net I
Slide 62: How does Arch compete?
How does Arch compete? Loan structure flexibility, responsiveness and Small experienced team and flat structure certainty compared to traditional financiers Competitive loan pricing typically within 1–2% of Established 20-year track record with deep the traditional financiers industry networks and r
Slide 63: Why a warehouse structure?
Why a warehouse structure? 100% of capital Scalable to large Arch as residual structure can be funded portfolios, can be further income noteholder using debt notes enhanced through receives profits securitisation Responsible • Loan size $6m lending • Property location limited to capital cities and r
Slide 64: Borrower profile
Borrower profile Borrowing purpose Drivers • Investment • Acquisition or refinance (flexible • Owner occupiers structure, increased leverage) • Future development Borrowers Sponsor profiles • Companies • Medium/high-net-worth • Trusts individuals • Individuals AFWT portfolio Trust size $400m+ Number
Slide 65: What are we mindful of in the current environment?
What are we mindful of in the current environment? Borrower servicing Valuation declines Retaining and building team • Risk mitigated by underwriting • Risk mitigated through lower LVRs on • Focus on retention, build on role clarity sensitivity of new loans and new loans and heightened monitoring an
Slide 66: Peer Estate
Peer Estate Peer-to-Peer lender of mainly first mortgage Loans written directly and investors purchase commercial loans with short tenure (<18 months) participations in each loan Complimentary to Arch with similar loan sizing Brings tech to capital and loan sourcing with and sourcing channels. Loan
Slide 67: Growth opportunities
Growth opportunities AFWT Second Warehouse Peer Estate • Continued AUM growth • Widen Arch’s scope • Investor base growth (larger single-cheque lending) • Increase volume and size of loans • Broader scope (SMSF lending, • Cheaper and more diverse funding longer term loans, low doc) • New products wi
Slide 68: Ripe for Growth – Australia’s Burgeoning Build-to-Rent Sector
Ripe for Growth – Australia’s Burgeoning Build-to-Rent Sector Mark Fischer – Global Head of Real Estate and Co-Founder James Harpham – General Manager – Capital & Investments, GURNERTM Moderated by Rohan Davis – Co-Head of Equity Strategies & Head of Origination 66
Slide 69: A leading Australian BTR platform
GQ platform overview Leading Australian BTR platform with existing scale, established in 2021 by Qualitas and GURNERTM Grown to become $1.2B 4 assets A leading Australian BTR Gross capital commitment Secured portfolio to date platform 1,400+ units Secured portfolio to date 3,600+ units Pipeline acro
Slide 70: Build-to-rent market
Build-to-rent market Burgeoning BTR sector has strong tailwinds and supply is accelerating ANNUAL BTR APARTMENT SUPPLY1 AUSTRALIAN BTR SECTOR SIZE2 12,000 10,000 9,531 A$85.0bn International BTR perspective 1% of Total Housing Market 11% 8,000 6,000 Proportion of total 4,451 A$22.0bn housing market
Slide 71: US BTR / multifamily: the largest REIT sub-sector
US BTR / multifamily: the largest REIT sub-sector FTSE Nareit equity REITS - market capitalisation by property sector ($USD billion)1 $ 205 bn $ 174 bn $ 161 bn $ 111 bn $ 110 bn $ 95 bn $ 77 bn $ 76 bn $ 37 bn $ 33 bn Residential Retail Industrial Health Care Self Storage Data Centers Speciality Of
Slide 72: Portfolio overview
Portfolio overview Beach House – 297 units City Road – 394 units Queens Parade – 339 units Hassall Street – 397 units VIC NSW 70
Slide 73: Portfolio overview (continued)
Portfolio overview (continued) Melbourne Sydney C D B A Project Name A Beach House B Grand Madison C Queens Parade D Hassall Street 3-7 Wellington Street, 334-344 City Road, 26-56 Queens Parade, 12 Hassall Street, Location St Kilda VIC Southbank VIC Fitzroy North Parramatta NSW Number of Units 297 3
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Slide 75: BTS and BTR – supply/demand balance – Melbourne
BTS and BTR – supply/demand balance – Melbourne BTR Apartments 20,000 BTS Apartments Population growth at 130K p.a. Total number of apartments 15,000 Population growth at 105K p.a. Population growth at 95K p.a. 10,000 Shortage of supply of BTS and BTR apartments 5,000 0 FY09 FY10 FY11 FY12 FY13 FY14
Slide 76: US BTR / multifamily: trades at the tightest cap rates
US BTR / multifamily: trades at the tightest cap rates Forecast 12% 10% 8% 6% 4% 2% 0% 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 BTR Office Retail Industrial Hotel U.S. 10-Year Treasury Yield Source: CBRE October 2022 74
Slide 77: Unlevered return and cap rate metrics
Unlevered return and cap rate metrics BTR vs. Office Indicative 10-year unlevered return bridge BTR Office Source: Illustrative example only. 75
Slide 78: Australian BTR opportunity: development and stabilisation returns
Australian BTR opportunity: development and stabilisation returns Return profile of BTR fund* 10 year fund Develop 15-25% Hold period return is inherently lower risk and return than the develop period Hold 8-10% Extending fund life spreads the development uplift (higher returns) over a longer period
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Slide 80: Seeking Opportunistic Returns in Private Equity Real Estate
Seeking Opportunistic Returns in Private Equity Real Estate Tim Johansen – Global Head of Investment and Funds Risk Henry Vuu – Co-Head of Equity Strategies and Head of Execution & Analysis 78
Slide 81: What is opportunistic investing?
What is opportunistic investing? Principal led investing with a focus on influence, value creation and exit RISK-RETURN GRAPH* Being a principal – Business plan to create Return control and influence value and then exit Outperform risk and return curve Opportunistic 20% + Value-Add Flexible capital
Slide 82: What drives opportunistic investments?
What drives opportunistic investments? Sponsor or market event driven need for flexible capital • Growth and risk diversification Sponsor • Recycle capital driven • Maximise returns • Flexibility Demand for flexible capital Market • Withdrawal of debt event driven • Macroeconomic impacts 80
Slide 83: Why does the strategy exist?
Why does the strategy exist? Qualitas acts as the intermediary to bridge the needs of the users and sources of capital Qualitas Investors Sponsors • Origination and expertise not easily • Costly to build infrastructure replicable • Concentration risk for investors • Requires high conviction • Direct
Slide 84: Scalability
Scalability Growth through increasing investment tickets and portfolio plays QREOFI | Qualitas Real Estate Opportunity Fund 1 22 $21m investments Average transaction size QREOFIII | Qualitas Real Estate Opportunity Fund 3 QREOFII | Qualitas Real Estate Opportunity Fund 2 Launched $300m 8 $38m invest
Slide 85: Case study: preferred equity residential investment
Case study: preferred equity residential investment Sydney, NSW Acquisition phase Value creation Exit • Asset quality • Protect downside • Presales • Situational • Secured cheaper debt • Refinance ~$45m 24 month 22% 1.39x Commitment Investment term Gross IRR Gross multiple 83
Slide 86: Key takeaways
Key takeaways Track record of performance Access to deep relationships and wide reach Strong origination platform Disciplined approach to deployment and structuring for downside risk 84
Slide 87: Closing Remarks
Closing Remarks Andrew Schwartz – Group Managing Director and Co-Founder 85
Slide 88: Disclaimer
Disclaimer This presentation has been prepared by and its sole responsibility of Qualitas Limited (ACN 655 057 588). To the maximum extent permitted by law, the information contained in this presentation is given without any liability whatsoever to Qualitas Limited, any of its related entities, or Q
Slide 89: Appendix A: Flexible Financing Solutions for Construction Debt
Appendix A Flexible Financing Solutions for Construction Debt 87
Slide 90: Construction financing at Qualitas
Construction financing at Qualitas Transparency and clarity of term sheet is key to our success Key terms Loan details Size • >$50m Tenor • Typically 12 – 36 months Target IRR • 10% - 13% • Upfront fee (paid at financial close) • Line fee on facility limit (over the life of the loan) Cost structure
Slide 91: Appendix B: Ripe for Growth – Australia’s Burgeoning Build-to-Rent Sector
Appendix B Ripe for Growth – Australia’s Burgeoning Build-to-Rent Sector 89
Slide 92: GQ location principles and market positioning
GQ location principles and market positioning PILLAR 1 PILLAR 2 PILLAR 3 PILLAR 4 Target demographics Low existing supply of Constrained future supply Strong existing % of renters, % of apartments, quality product and service of competing stock neighborhood Aaenity income levels KEY APARTMENT MARKET
Slide 93: BTS and BTR – supply/demand balance – Sydney
BTS and BTR – supply/demand balance – Sydney BTR Apartments BTS Apartments 30,000 Population growth at 90K p.a. Total number of apartments 20,000 Population growth at 75K p.a. Population growth at 60K p.a. 10,000 Shortage of supply of BTS and BTR apartments 0 FY FY FY FY FY FY FY FY FY FY FY FY FY F
Slide 94: Beach House
Beach House Status: Under construction, opening early 2024 Address: 3-7 Wellington Street, St Kilda (Melbourne) Units: 297 17,834m2 (residential net lettable area) plus commercial and Area: retail Levels: 12 & 28 story buildings — Gym — Children’s indoor play areas — Saunas and yoga rooms — Cinema r
Slide 95: City Road
City Road Status: Under construction, opening late 2024 / early 2025 Address: 334-344 City Road, Southbank (Melbourne) Units: 394 25,346m2 (residential net lettable area) plus commercial and Area: retail Levels: 41 — Level 7 completely dedicated to amenity (podium top) — Ground floor offers a commer
Slide 96: Queens Parade
Queens Parade Construction scheduled to start late-2023 with building Status: forecast to open in mid-2025 Address: 26-56 Queens Parade, North Fitzroy (Melbourne) Units: 339 22,013m2 (residential net lettable area) plus commercial and Area: retail Levels: 3 towers of 8, 9 and 10 levels — Multiple an
Slide 97: Hassall Street
Hassall Street In planning, construction scheduled to start 1H 2023 with Status: building forecast to open in mid-2026 Address: 12 Hassall Street, Parramatta (Sydney) Units: 397 24,367m2 (residential net lettable area) plus commercial and Area: retail uses Levels: 61 — Activated ground floor with fo
Slide 98: Appendix C: Seeking Opportunistic Returns in Private Equity Real Estate
Appendix C Seeking Opportunistic Returns in Private Equity Real Estate 96
Slide 99: What do we look for in investments?
What do we look for in investments? Solid fundamentals, backed by experienced sponsors that can be actively managed to enhance value Sponsor quality Investment size • Mid-tier or above – sufficient • $30-100m infrastructure and resources to deliver • Range sits outside of private and project, sound
Slide 100: How do we underwrite equity versus credit?
How do we underwrite equity versus credit? Equity lens Risk management and Sponsor mitigation • Investment achieves fund strategy • Cap rate compression beyond fair • Alignment and control premium to risk-free rate • Capability and skillset • Accretion outcome • Construction procurement impact on fe
Slide 101: Risk management
Risk management Rigorous risk assessment process, effective structuring and appropriate pricing are key success factors Three lines of Active and invasive Risks Allocations defence risk management • Investment team • Timings and momentum • Identify • Objectives of fund • Risk team • Accountability •
Slide 102: Fund key
Fund key Listed Entity ASX:QAL Qualitas Group Listed Fund ASX:QRI Qualitas Real Estate Income Fund Unlisted Funds QBIF Build-to-Rent Impact Fund QCDF Construction Debt Fund QCDFII Construction Debt Fund 2 QDCI Diversified Credit Investments QDREF Diversified Real Estate Fund QFIF Food Infrastructure
Slide 103: Glossary
Glossary ADI Authorised deposit-taking institution Invested FUM Funds currently deployed. Capital drawn for equity funds. Funds drawn on live deals / loans less repayments for credit funds ADIA Abu Dhabi Investment Authority IRR Internal rate of return APRA The Australian Prudential Regulation Autho