Why Qualitas’s IPO was critical in winning ADIA mandate

Andrew Schwartz, co-founder of Qualitas, says the offering will better enable the firm to meet the co-investment requirements of institutional investors.

Australian real estate manager Qualitas has secured real estate heavyweight Abu Dhabi Investment Authority’s first private real estate credit mandate to invest in Australia.

Andrew Schwartz, group managing director and co-founder of Qualitas, told PERE that this is the firm’s first partnership with ADIA and its first significant mandate following its A$335 million ($233 million; €228 million) IPO at the end of 2021.

The A$700 million mandate is fully discretionary, and the capital will go into a newly formed entity called Qualitas Diversified Credit Investments, according to a release. QDCI has a flexible mandate and can invest across different real estate credit strategies in Australia. In addition, ADIA has chosen the option to potentially acquire 9.99 percent of Qualitas’s new ordinary shares based on the condition that the sovereign wealth fund will invest A$1 billion in Qualitas’s products in the next two years. The investor can either re-up its investment in QDCI or commit new capital to the firm’s other mandates. QDCI has a fund life of up to eight years with a five-year investment period. ADIA is the only investor in the fund.

Schwartz believed the firm’s IPO last year was critical in winning the mandate with ADIA as it gave the firm the ability to co-invest alongside the investor. In this case, Qualitas is putting in A$35 million, or 5 percent of QDCI’s total capital. “This is important to ADIA because we could show the alignment of interest. We would not have had the A$35 million to co-invest without the IPO and that really validates the reason for us to do the listing. People also understand your brand a lot better when you have done an IPO,” he explained.

In the firm’s IPO prospectus, Qualitas targeted committing 5 to 10 percent of co-investment capital in its future mandates. “The success of our IPO and the larger balance sheet it delivers is anticipated to accelerate our growth in funds under management through an enhanced ability to meet the co-investment requirements of global and domestic institutional investors and provide certainty of capital to assist in underwriting investments for our funds on a timely basis,” Schwartz said in a statement last year.

Currently, the firm is fundraising across different products and is expected to partner with more institutional investors to look at the Australian real estate credit market.

“It is a changing market in Australia with interest rates going up and repricing of assets,” said Schwartz. He added it was “a great time to be investing in private real estate credit” because investors would be protected from valuation declines by not having direct exposure to the assets, while being able to benefit from upward movements in interest rates. “There is also less liquidity in the market today than there was just a few months ago,” noted Schwartz.