ASX-listed alternative asset manager MA Financial has partnered with one of the Asia’s largest private equity firms, Warburg Pincus, to launch a $1-billion real estate credit vehicle providing institutional investors access to Australia’s real estate credit market.
This initiative is expected to help close the funding gap in the Australian residential market by offering real estate credit to high-quality developers and funding residential projects.
MA Financial (former Moelis Australia) joint chief executive Julian Biggins said the Australian residential market remained very attractive, and the new vehicle would help meet demand for sophisticated borrowers to address Australia’s nationwide housing shortage.
Under the terms of the deal, MA Financial will manage and market debt investments in the vehicle to institutional investors, while its partner will offer notes in the vehicle to several of its existing funds and select investors across their network.
The vehicle will initially target a first close of at least $700 million, inclusive of MA Financial’s co-investment.
The ASX-listed manager, which was advised on the deal by CBRE Capital Advisors, will co-invest via equity and notes in the vehicle in an amount representative of 2 per cent of total capital and up to $20 million.
As part of the agreement, Warburg Pincus would also be eligible to 2.5 million shares in MA Financial upon the vehicle achieving targets of about $500 million, and further options to acquire another 2.5 million shares upon achieving a target of about $1 billion, with a strike price of $6.
CBRE Capital Advisors managing director Paul Ryan said there was “considerable interest” from investors seeking exposure to Australia’s real estate private credit market, which offered highly attractive risk-adjusted returns.
“With non-bank lenders representing approximately 10 per cent of the domestic market compared to over 50 per cent in mature global markets there is significant opportunity for future growth,” he said.
According to Stuart McCann, also a managing director at CBRE, the Australian residential market is experiencing one of the largest housing deficits on record, with an estimated shortfall of over 250,000 homes projected over the next three years.
He said the commercial real estate funding market should expand significantly to support developers in activating supply.
Warburg Pincus, which has nearly 20 years of experience investing in Asian real estate companies and platforms, has more than $83 billion in assets under management and an active portfolio of more than 225 companies.
