This article is from the Australian Property Journal archive
AUSTRALIA’S growing private credit market has a new major player with global fund manager PGIM Real Estate launching its first real estate debt strategy down under, which has raised $300 million for its first fund and is on track to hit a target of $750 million.
Confirmed advanced commitments from several institutional investors should see it surpass $600 million in the next few months, it said.
The announcement comes hot on the heels of PGIM upping its exposure to Australian commercial real estate. It has just made the co-acquisition of a 19-hectare south-east Melbourne site alongside Elanor Investors Group, where they will build a 113,000 sqm last-mile logistics estate, while last month it partnered with KordaMentha’s KM Property Funds to acquire a Visy distribution centre in Melbourne’s western suburb of Laverton North for $92 million.
The debt strategy is will managed by a team including Steve Bulloch, as head of Australia and head of Asia Pacific real estate debt, and Emma Jack, head of debt portfolio management in Asia Pacific at PGIM Real Estate.
“Driven by structural and cyclical factors, the long-term opportunities in Australian real estate debt are currently very compelling for investors,” Bulloch said.
“The real estate market in Australia has been one of the most resilient globally thanks to its strong economic fundamentals, population growth and limited supply. The investment case for real estate debt is further bolstered by the peak interest rates resulting in strong risk-adjusted returns.
“We anticipate a further shift from traditional bank lenders to alternative capital sources. Pressure on valuations and the upcoming wave of maturities for loans mostly held by banks are set to create a meaningful funding gap, bringing opportunities for debt strategies like ours.”
The first dedicated, commingled Australian real estate debt strategy aims to provide “strong risk-adjusted returns and downside protection” with an investment strategy focused on senior development loans, gap financing and financing of transitional Australian real estate assets.
PGIM, which has a US$108 billion global debt business, expects to deploy in excess of US$1 billion over the next few years in Australia, across both traditional core senior debt and higher-yield debt.
Growing sector
The private debt market in Australia is rising, at a time in which Australian banks grew their commercial real estate loan books at 5.1% year-on-year – the slowest annual rate in four years.
Leading the rush is David Di Pilla’s HMC Capital, which harbours aims to build a $5 billion private credit platform and has just acquired commercial real estate private debt fund manager Payton Capital in a $127.5 million deal.
That was quickly followed by $12.2 billion specialist alternative investment manager Regal Partners acquiring Adrian Redlich’s commercial real estate lending business Merricks Capital for $235 million.
