Non-bank fund gears up with $330m debt investment
Non-bank financier MaxCap Group has shifted its commercial real estate lending up a gear, creating a $500 million open-ended platform backed by large Australian and offshore pension funds and a UK insurer.
Group founder Wayne Lasky said the MaxCap First Mortgage and Construction Fund has lent $330 million in first mortgage debt across eight assets since its inception in December, and was aiming for a fund of $500 million covering 12 to 15 loans.
The fund’s launch tracks growing interest from superannuation and offshore pension funds in servicing commercial property debt in Australia, a lending sector Mr Lasky maintains faces a $50 billion shortfall as major banks pull back.
Last year banking regulator APRA boosted capital requirements for the country’s big four banks by between 4 and 5 percentage points of risk-weighted assets, forcing them to increase their capital buffers to 19 per cent by a 2023 target, up from 14.5 per cent currently.
The change will put pressure on the banks’ market share in commercial real estate debt, with their funding expected to fall to between 60 and 65 per cent, down from current levels around 75 to 80 per cent, and open up a funding gap for other lenders.
The market was now rebalancing, Mr Lasky said.
Australia Super recently upped competitive pressure on the banks by cutting out the middleman and offering big corporate and commercial borrowers a single $500 million “one-stop shop” line of credit.
The giant super fund, which boasts 2.2 million members, signed large corporate debt deals with Richard Pratt’s Visy Industries and ASX-listed National Storage and partnered with MaxCap to be the sole debt funder on mining giant Rio Tinto’s new $360 million Brisbane office.
MaxCap last month secured a $600 million commitment from Dutch pension giant APG in a deal that shows the growing interest from offshore capital in debt funding.
APG has invested its first $300 million tranche via MaxCap’s first mortgage fund, along with an unnamed UK insurance firm.
“There are very interested and engaged global investors,” Mr Lasky said. “What they are trying to determine is how best to enter the market. That’s not as easy as you might think.”
The fund was seeded with relatively short duration – average 20-month – construction loans, which would provide investors with quarterly cash yields as they matured and were paid down, he said. Investors were locked in for 24 months but were free to redeem after that.
Mr Lasky said the group’s $2 billion forward loan book was a good “lead indicator of the future built form” that showed the market was “shifting gears”.
More than half of that loan book was being written for non-residential construction debt, a significant difference from the previous year, when 75 per cent was allocated to residential.
“It’s a very material change,” Mr Lasky said. MaxCap currently has more than $4 billion of funds under management.
