Cbus Property, the A$21 billion (€14.7 billion; $19.2 billion) real estate arm of Cbus, the Australian superannuation fund for construction and infrastructure, has made its first investment in real estate mezzanine finance.
The superannuation fund has backed Qualitas Real Estate Finance, the first fund launched by Australia-based private real estate investment firm Qualitas Property Partners, to the tune of hundreds of millions of dollars, PERE understands.
Qualitas, which had previously been active in the real estate mezzanine space using resources from its balance sheet, has the option of inviting other investors into the fund at a later stage.
The exact size of the fund was not disclosed, but the fund’s managing director Tim Johansen told PERE that the investment is “significant” for Cbus.
The fund is open-ended in structure and is expected to grow “as demand requires,” Johansen said. Although there are no plans to do so yet, Johansen said the partnership will target institutional investors globally if borrower demand calls for more capital down the line.
The firm is expected to focus on making bridge loans in the major markets of the Australian east coast, and particularly the medium and high density residential development sector which Johansen described as the most active real estate market in Australia currently. The mezzanine fund might diversify into office, industrial and retail development at a later stage, the firm said.
The firm already has several transactions lined up from Qualitas’ existing pipeline, and it is doing due diligence on certain transactions. Loans to developers are intended to last for 18 months to 24 months, and average between A$15 million and A$40 million in size, Johansen said. The firm overall will target a mid- to high-teens IRR for the fund.
“Real estate is a capital-heavy industry, and we want to provide liquidity to the market to get projects done,” Johansen said. Cbus to date has not been active in the real estate mezzanine space and saw the opportunity to enter the market with the creation of this fund, Johansen said.
Cbus is not the only investment management firm currently active in real estate mezzanine lending in Australia. Last month, Australian fund manager Merricks Capital launched an A$150 million fund to provide mezzanine financing to developers of up to 15 percent of a project’s cost.
Qualitas has primarily invested its own balance sheet capital in Australian real estate, bringing external investors alongside in specific deals. The firm now has around A$1.9 billion of assets under management.
Following the launch of Qualitas Real Estate Finance, Qualitas is understood to be preparing for the launch of second property fund in the coming months but declined to divulge details as they are still in their infancy.
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