Entitlement Offer: Qualitas Real Estate Income Fund

The Qualitas Real Estate Income Fund (“Trust”) is a listed investment trust (LIT) managed by the Qualitas Group and provides investors with exposure to the commercial real estate (CRE) debt market. The CRE debt market is be currently worth ~$290 billion and growing at ~4% p.a. (APRA) at a time when the Royal Commission and global Basel III capital reforms are causing banks to increasingly retreat from the sector. This presents a significant growth opportunity for non-bank financiers such as Qualitas to selectively capture additional market share and build upon its A$2.6 billion track record of CRE transactions across the capital structure. The Qualitas Group has a disciplined track record in CRE and loan origination, with zero capital losses across 144 transactions since inception in 2008.

The Trust is a closed-ended trust with a target return of 8.00% per annum (net of fees and expenses), which we believe to be commensurate to the risk associated with the provision of debt funding for typically illiquid and bespoke CRE assets. The funds raised will effectively be allocated through the Sub-Trust to Qualitas’ wholesale funds, Arch notes and direct loans, providing exposure to the senior and mezzanine loans originated by the Qualitas Group.

The Trust aims to raise an additional $150 to $266 million with a final allotment date of 18 October 2019 at an indicative NAV of $1.60 per unit. The fee structure includes a 1.50% p.a. of portfolio NAV management fee, with a 50% reduction in this fee to be applied on any uninvested capital raised through the offer, as well as a 20.00% performance fee for outperformance above the 8.00% p.a. (net) hurdle rate. Qualitas will draw additional loan amounts to its 10-year amortising 5% loan to cover setup and offer costs associated with the entitlement offer.

Please note that the attached Product Disclosure Statement (PDS) was lodged with ASIC on 11 September 2019.  BondAdviser reserves the right to vary or withdraw our research opinion should material changes arise during the lodgement period.

Summary details of the transaction are listed in the table below:
 

Product Type

Listed Investment Trust

Sub-Asset Class

Credit

Issue Size*

$416,000,000 - $532,000,000

Manager

QRI Manager Pty Ltd

Net Asset Value

$1.60

 Administrator

QRI Fund Services Pty Ltd

Fixed / Floating

Floating

Responsible Entity

Trust Company (RE Services) Ltd

Payment Frequency

Monthly

Custodian

Perpetual Corporate Trust

Target Distribution

8.0% p.a. (net of fees & expenses)

Unit Registrar

Automic Pty Ltd

Franking Credits Inclusive

No

Offer Opens**

11 September 2019

ASX Listed

Yes (ASX Code: QRI)

Offer Closes**

8 October 2019

Convertible

No

Allotment Date**

18 October 2019

GICS Sector

Not Applicable

Commences Trading On**

18 October 2019

Asset Class

Fixed Income

First Payment Date

On or after 16 November 2019

* Issue size includes current capital of ~$266 million and between $150 and $266 million of new capital through the 2019 1 for 1 entitlement offer...

** Dates are varied and based on differing offer mechanisms. Generally, earliest and latest dates are shown, but we advise investors to check details..

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