Alternative Lenders Rush Into Property Market Down Under
Alternative Lenders Rush Into Property Market Down Under
(Bloomberg) -- Australia’s property market is seeing non-bank debt providers step in to plug a hole in funding left by big banks, whose lending is being hobbled by increased regulatory pressures and higher capital requirements.
The pull-back by banks leaves a gap in funding needs that’s expected to increase to A$50 billion ($35 billion) by 2023, according to MaxCap Group, an Australia and New Zealand commercial real-estate debt specialist. Melbourne-based MaxCap has more than A$2 billion of deals that it will fund in the next nine to 12 months, and recently arranged a A$360 million construction loan for a Brisbane office redevelopment project.
“The alternative lending opportunity for the non-bank sector is growing quite rapidly,” said Wayne Lasky, founder and managing director at MaxCap, which has A$3.98 billion under management. Some large transactions in the real estate market, which might have traditionally been financed by the big four banks, have taken place recently by non-bank credit providers, he said in an interview.
Banks are pulling out of lending to assets that are low or non-income generating -- such as land banking and construction funding -- because of the way regulators are imposing capital requirements on them, Lasky said. Commercial property exposure in Australia by banks was about A$247 billion at the end of March, according to the regulator.
Australia’s financial regulator in July ordered three of the nation’s largest banks to increase their capital holdings by A$500 million each, on top of the A$1 billion capital buffer imposed last year.
MaxCap sees opportunities in providing debt for “beds, sheds and desks” -- residential, hotels, student accommodations, industrial and offices in Australia’s major cities, and is cautious on traditional retail space, Lasky said. Around 80 percent of its portfolio is in senior debt, with the rest in junior debt and structured finance where the underlying securities are real estate, he said.
It has a commercial real estate debt mandate from the nation’s largest pension fund, AustralianSuper, and recently secured a commitment of up to A$600 million from APG Asset Management of the Netherlands. Managers of Australia’s $2 trillion of retirement savings are hunting for yield as interest-rate cuts by the central bank to a record low threaten to result in low returns on their investments.
“Global investors recognize the benefit of a highly transparent marketplace with the highest standards of underwriting and a well-understood and dependable legal framework,” said Lasky. “We expect a lot more capital flow into the market.”
To contact the reporter on this story: Mariko Ishikawa in Sydney at mishikawa9@bloomberg.net
To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Beth Thomas, Ken McCallum
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