Abu Dhabi’s wealth fund cosies up to Qualitas with $1.4b for commercial investments

Abu Dhabi’s sovereign wealth fund has upped its stake to $1.4 billion in a new fund operated by alternative asset manager Qualitas (ASX: QAL), adding to a wave of inflows for the Melbourne-based group in the past two months.

The latest investment of $700 million by the Abu Dhabi Investment Authority – one of the world’s largest sovereign funds - to Qualitas Diversified Credit Investments (QDCI) brings the total funds under management for the Qualitas group to $7.5 billion.

The ADIA top-up of the new commercial real estate fund comes on the heels of a $750 million commitment last week from an unidentified institutional investor for the Qualitas Construction Debt Fund II, which was launched in 2016 to provide senior-debt loans for property developments.

ADIA’s initial $700 million funding of Qualitas Diversified Credit Investments in August last year was accompanied by the issue of an option to acquire up to 32.6 million Qualitas shares at a strike price of $2.50.

Should ADIA - which has US$853 billion ($1.33 trillion) in funds under management - exercise all of its options, it will give the Abhu Dhabi’s sovereign wealth fund ownership of just under 10 per cent of Qualitas shares.

Qualitas co-founder and managing director Andrew Schwartz has welcomed ADIA’s latest commitment of $700 million to Qualitas Diversified Credit Investments.

“A repeat commitment at this scale from a long-term strategic investor such as ADIA is a strong endorsement of Qualitas’ funds management platform, growth potential, as well as our track record and experience through multiple cycles in the highly specialised commercial real estate sector,” Schwartz says.

“We have demonstrated rapid and consistent growth since our IPO in December 2021 growing FUM by 80 per cent despite this being one of the most dynamic macroeconomic environments we have experienced in our 15-year history.

“We have continued to execute on our growth initiatives, attracting larger mandates from investors and deploying into larger investments with a continued focus on sponsor quality.”

Schwarz notes that Qualitas has raised $1.45 billion in fresh capital since the end of June this year to be deployed for investment in Australian commercial real estate (CRE).

“This represents strong evidence of conviction in the sector from global institutional investors,” he says.

“Qualitas’ CRE private credit funds are delivering returns exceeding inflation on a compounding basis with downside protection. With the announcement of this mandate, Qualitas has $2.3 billion dry power ready to be deployed into the Australian CRE sector to take advantage of further dislocation in the financing market, as traditional financiers appear to continue to retreat, particularly in the residential and development sectors.”

Qualitas also has a solid presence in the residential market after partnering with Tim Gurner to deliver a pipeline of more than 3,650 build-to-rent apartments through the Qualitas-managed GQ Multifamily platform which has $3.2 billion in gross funds under management.

After receiving the $750 million institutional commitment last week, Schwartz revealed that Qualitas was fielding inquiries from developers looking to kickstart residential projects amid persistent tight vacancy levels. However, Qualitas says it remains cautious by partnering with experienced developers.

“The undersupply of housing is a key driver of the tight rental vacancy levels we are currently experiencing and we are starting to see increases in off the plan apartment sale prices in certain areas with deep supply shortage,” Schwarz says.

“We continue to be cautious in deployment and remain vigilant in asset selection by applying an equity lens on our credit investments. Progress on deployment depends on the timing of settlement on investment opportunities that align with our risk framework and appetite.”