A new dawn for Payton Capital

Please note, this interview was filmed on Friday 11 October, 2024

You may have heard recently that HMC Capital (ASX: HMC) acquired Payton Capital. Led by CEO David De Pilla, HMC manages $13 billion in assets and is looking to grow, pushing into the private credit space. 

Payton Capital manages $1.6 billion and is a specialist in Australian commercial real estate debt. 

According to Payton Capital co-head, Craig Schloeffel, the acquisition of Payton by HMC is a "hugely exciting development" that will create enhanced opportunities for stakeholders and clients of both groups.

"Payton Capital integrating to the HMC platform brings huge capability to us from their wealth of experience in being in funds management, both on an institutional grade level as well as through funds like their Capital Partners Funds, which is both retail and wholesale", says Schloeffel. 

In the following episode of the Pitch, we discuss the key people involved in the transaction and what they bring to the table, the big trends in the private credit space, and what makes for a sound investment in the space. 

Edited Transcript

Chris Conway: There's been some exciting developments since we last spoke. There's been an acquisition. Can you tell the audience about that?

Craig Schloeffel: We were 100% acquired by HMC Capital on 1 July this year, which is hugely exciting for us. Aside from that, we've continued to grow, with now over $1.6 billion in AUM and growing. And the market itself continues to grow, so it's a really exciting time to be in private credit.

Chris Conway: Sounds like it, Craig. Let's talk about the key people involved in the transaction, HMC acquiring Payton, and what those people bring to the table.

Craig Schloeffel: So from the HMC side, it was led by David Di Pilla, who is the Managing Director and CEO, alongside Matt Lancaster, who comes with a wealth of experience in private credit, having led the Macquarie principal finance partners business in New York. David himself has a wealth of experience in both property and funds management as well as investment banking, having worked for 25 years at UBS. And, of course, we've still got the Payton management team and staff, which our clients know and love today.

Chris Conway: Craig, let's talk about the benefits of HMC getting involved with Payton. I understand there are some bold growth and scale-up plans. Can you talk to us about that?

Craig Schloeffel: Payton Capital integrating to the HMC platform brings huge capability to us from their wealth of experience in being in funds management, both on an institutional grade level as well as through funds like their Capital Partners Funds, which is both retail and wholesale. On top of that, we've expanded. We've got offices now in Sydney, Melbourne, Brisbane, and WA, as well as the Gold Coast, and our team continues to grow across Australia.

Chris Conway: Where does that put you in terms of the broader HMC Group?

Craig Schloeffel: So for us, that means we're part of the HMC broader private credit platform led by Matt Lancaster. Obviously, we bring to the table the commercial real estate private credit, but we've got others within the group that will bring corporate credit, wholesale credit, and institutional grade credit. And we'll come to the market with a very diverse offering for investors.

Chris Conway: Craig, what about specific segments for expansion? What are you targeting and why are those areas appealing?

Craig Schloeffel: As we're really focused on continuing to build out our capability with new hires, we've recently brought on Dane Weiss who's leading the corporate private credit part of our business. One thing we are looking at, and it was recently announced by our CEO David Di Pilla, is the potential of a listed opportunity for clients.

Chris Conway: Craig, private credit has been one of the fastest-growing segments lately. What are some of the big trends that you're seeing?

Craig Schloeffel: Traditionally, private credit was the domain of family offices, large institutions, and wealthy individuals in Australia. And so we've seen huge growth most recently because the retail market and smaller wholesale clients are getting access via managers like ourselves to the fantastic risk-adjusted returns in our space. And I think that's the reason we've seen both the growth and the attractiveness of our asset class.

More than that, we're seeing banks pull back further and further from the type of lending they're doing, which creates fantastic opportunities for investors to participate.

Chris Conway: Craig, I hear a lot of numbers. Do you have any handle on the size of the opportunity just in terms of dollars, and can you share that with us?

Craig Schloeffel: Well, it is the big question. You can read many articles, which will give you many different answers. Look, the real answer is, no one really knows. Private markets are just that, but we commissioned some research a year ago which we're having updated at the moment. And back then, the size of the market was estimated at about $74 billion, but more interestingly, it's expected to double in the next five years. So the opportunity that's coming for investors is fantastic.

Chris Conway: All right, Craig, let's get to the nuts and bolts. We know it's growing, and we know there's capital flowing into the space, but what makes for a good investment in your eyes?

Craig Schloeffel: Number one, the reason you'd invest in private credit is that monthly income. It's an income product, so there's no capital growth associated with a product like ours, but that monthly income is very important to people, particularly with the ageing population and more and more people looking for this type of investment within vehicles such as self-managed super funds.

On top of that, in the commercial real estate private credit market, you are backed by a physical asset, and that provides real certainty of capital. And it also provides less fluctuation because the asset value typically won't deviate too much. 

Chris Conway: Craig, you've been with Payton for the best part of five years. You've seen some big growth and transformation over the journey. What has you most excited as you look ahead now?

Craig Schloeffel: The last five years in commercial real estate private credit have been an exciting time for anyone who's been in this space. We've seen enormous growth, we've seen consolidation within the market. And it's probably what I'm most excited about - players like ourselves who have been acquired by groups with the capability and capacity of HMC Capital - to come to market with a completely different offering. The market is becoming very sophisticated and I think our investors are going to benefit hugely from that. On top of that, the market itself continues to grow, so more and more investors are getting to see the fantastic risk-adjusted rewards that they can participate in.

Learn more

Payton Capital offers investors access to strong risk-adjusted investment opportunities in the Australian Commercial Real Estate Private Debt market. Find our more by visiting their website.