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

Qualitas has built a dominant market position as an alternative provider of real estate private credit. Find out why it is so unique.
Chris Conway

Livewire Markets

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.

Qualitas Real Estate Income Fund
Alternative Assets
QRI disclaimer: This communication has been issued by The Trust Company (RE Services) Limited (ACN 003 278 831) (AFSL 235150) as responsible entity of The Qualitas Real Estate Income Fund (ARSN 627 917 971) (Trust) and has been prepared by QRI Manager Pty Ltd (ACN 625 857 070) (AFS Representative 1266996 as authorised representative of Qualitas Securities Pty Ltd (ACN 136 451 128) (AFSL 342242)). This communication contains general information only and does not take into account your investment objectives, financial situation or needs. It does not constitute financial, tax or legal advice, nor is it an offer, invitation or recommendation to subscribe or purchase a unit in QRI or any other financial product. Before making an investment decision in respect of the Trust, you should consider the current Product Disclosure Statement (PDS) of the Trust and the Trust’s other periodic and continuous disclosure announcements lodged with the ASX which are available at www.asx.com.au and assess whether the Trust is appropriate given your objectives, financial situation or needs. If you require advice that takes into account your personal circumstances, you should consult a licensed or authorised financial adviser. While every effort has been made to ensure the information in this communication is accurate; its accuracy, reliability or completeness is not guaranteed and none of The Trust Company (RE Services) Limited (ACN 003 278 831), QRI Manager Pty Ltd (ACN 625 857 070), Qualitas Securities Pty Ltd (ACN 136 451 128) or any of their related entities or their respective directors or officers are liable to you in respect of this communication. Past performance is not a reliable indicator of future performance. The PDS and a target market determination for units in the Trust can be obtained by visiting the Trust website www.qualitas.com.au/qri. The Trust Company (RE Services) Limited as responsible entity of the Fund is the issuer of units in the Trust. A person should consider the PDS in deciding whether to acquire, or to continue to hold, units in the Trust. Livewire gives readers access to information and educational content provided by financial services professionals and companies ("Livewire Contributors"). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision, please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.

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Chris Conway
Managing Editor
Livewire Markets

My passion is equity research, portfolio construction, and investment education. There are some powerful processes that can help all investors identify great opportunities and outperform the market, and I want to bring them to life and share them...

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