SYDNEY--()--Australia's most experienced non-bank commercial property debt organisation Balmain, has launched a A$500 million secured commercial property debt fund investing entirely in the $10 million to $20 million mid-cap sector of the Australian commercial property market.
“It is one of the largest asset classes in Australia, yet for close to 20 years, institutional and foreign non-bank investment has been lacking. With the rapid reduction in both foreign bank lenders and other structural changes, the remaining lenders of note are limited to Australia's four largest banks.”
Balmain Executive Chairman, Michael Holm said, "we are focusing on this area of the market because returns are higher, there is greater diversification in portfolio construction and risks are lower and easier to manage."
The new fund is aimed at foreign and Australian institutional investors and is targeting net returns of 3.5% above the 90-Day Australian Bank Bill rate, which is currently 3.5%. The Fund is seeking to raise A$500 million.
Mr Holm said that the fund should be of interest to foreign investors because of the quality of the underlying assets, sustainability of returns and relative stability of Australian commercial property compared to many established overseas markets.
"The Australian commercial property debt market has an estimated value of $500 billion and an annual turnover of approximately $100 billion.
"It is one of the largest asset classes in Australia, yet for close to 20 years, institutional and foreign non-bank investment has been lacking. With the rapid reduction in both foreign bank lenders and other structural changes, the remaining lenders of note are limited to Australia's four largest banks.
"Capital constraints combined with the complexities surrounding BASEL II and III have created a lender's market, where margins are two to three times higher than before the global financial crisis, and yet have the lowest risk levels in decades.
"In addition to the higher margins available, a major attraction of mid-cap property loans is that the first mortgage security is invariably supplemented by corporate or personal borrower guarantees, which not only helps protect the lender but drives good borrower behavior," said Mr Holm.
Recent transactions such as Canada's Public Service Pension Board's (CPPIB) commitment of $1 billion to Lend Lease's Barangaroo development reflect a renewed interest from foreign institutions in investing in the Australian commercial property market.
"For professional investors looking for lower risk and stable assets with predictable income streams, commercial property mortgages are an excellent fit. They offer high relative yields with modest and controllable risks," added Mr Holm.
About Balmain Investment Management Pty Limited
Balmain Investment Management Pty Limited is an independent funds manager specialising in secured private debt in Australia and New Zealand. Balmain has been in operation for over 30 years, with a sole focus on secured commercial property lending. It is the only non-bank private debt organisation in Australasia with a full suite of services in the credit value chain. www.balmaininvestment.com.au.