If there is a major property deal happening in Australia, this company knows about it

Qualitas is unique for several reasons. For one thing, 70% of the company's business is focused on real-estate private credit, where it acts as an alternative to the big banks and has committed capital of almost $6 billion.

If there is a major property transaction happening in Australia of any significant size, chances are Qualitas knows about it.

Furthermore, Qualitas is the only ASX-listed provider of real estate private credit.

It’s a great space to occupy. Qualitas Managing Director and Co-Founder, Andrew Schwartz, estimates the size of the market to be approximately $417 billion – and that is expected to grow as more and more people become aware of alternative lending opportunities.

As the market grows in size and understanding of alternative lenders increases, our sector is gaining market share.

In this Expert Insights interview, Schwartz shares how he and his team identify opportunities and sort the wheat from the chaff. He also outlines the Qualitas value proposition for investors.

Please note: This interview took place on Monday 6 March 2023. 

Edited Transcript

Qualitas is quite unique, what makes it so?

Andrew: I think it's unique because 70% of our business is focused on real estate private credit. We're not trying to be a general credit provider, be all things to all people.

We are focused on the real estate market and we are heavily focused on being an alternative real estate credit provider into that market.

We're ASX listed, so from an investor's point of view, if one is looking to gain an investment advantage by investing in the sector, then Qualitas is one of the few stocks, if actually not the only stock at the moment, that can offer that on the ASX.

I'd have that right up there as our main area of uniqueness. 

How big and liquid is the market, and how often are you transacting?

It's a very large and very liquid market.

We estimate the size of the commercial real estate debt market to be about $417 billion. It's very heavily dominated by the four major trading banks.

I think as the market grows in size and understanding of alternative lenders into the market, our sector is gaining market share.

But it is a large market and it certainly has a lot of players and fundamental liquidity in the market as well. 

What tools do you use to identify opportunities, and what do you need to see to buy? 

Careful due diligence is the main tool, I would say. 

We're not a high volume investor. Unlike a trading bank that is trying to own parts of the market and really be the financier to the Australian real estate market, Qualitas doesn't see itself in that way. We really view our key clients as those that provide us with the capital, the mandates of the funds that we manage.

As a result of that, we are looking for best-in-breed developers, the best real estate opportunities on a risk-adjusted basis.

And there's no room for us having impaired assets or underperforming assets in our portfolio.

If there's a major transaction going on in Australia, I think it's likely that Qualitas will be aware of it, given our brand and our dominance in the market.

We're not here to do every single investment that passes by our desks. In fact, in 15 years we've done 200 private credit investments, so enough to establish who we are and our track record, but it's not hundreds and hundreds of investments that we felt compelled we needed to do. When you think about that over a 15-year period, it's one or two investments carefully selected a month, not as I said, not hundreds of investments.

What does Qualitas offer investors that they can’t access elsewhere?

I think that for investors, private credit has really been the domain of large institutional clients, whether that be superannuation funds or offshore sovereign wealth funds. 

Vehicles like Qualitas, whether it's QAL, our head stock, which is the manager of these various funds, or whether it be QRI, which is our listed investment trust that purely specialises in real estate loan receivables, it really has brought that type of investment to the smaller investor. 

It's enabled them a platform to also access private credit with a manager who does specialise in an institutional credit offering, but be able to access that at the smaller investor level and again, I think that is something relatively unique that Qualitas has brought to the market.

Do you seek equity-like returns with debt-style security?

If you’re looking for a new kind of opportunity beyond shares, fixed income and traditional property investments, the Qualitas Real Estate Income Fund (ASX:QRI) could help you diversify your portfolio and meet more of your goals by investing in the growing opportunities of the commercial real estate (CRE) debt market. Learn more about the fund here.

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