AustralianSuper has taken one of the largest steps to date into the growing gap left by Australia’s big four banks, with investment manager MaxCap arranging a $360 million deal for the local super fund to develop Brisbane’s new home for mining giant Rio Tinto.
AustralianSuper is the sole debt funder of the Midtown Centre in the Brisbane CBD, which will develop 45,000 square metres of office space by joining two existing towers into a single 26-storey tower, under a Fender Katsalidis design that creates a new role for older buildings with floorplates too small to meet modern demands.
But while the redevelopment of the former Health and Forestry House buildings at 155 Charlotte Street and 150 Mary Street marks a step forward in the reuse of existing office buildings, the financing arrangement also marks a step change by non-bank lenders into what MaxCap estimates will grow to a $50 billion funding gap in the $288 billion commercial real estate debt by 2023.
“At a level of greater than $360 million, this is possibly the largest single hold for development finance ever in Australian history and represents a watershed moment for the non-bank finance industry,” said Eddie Law, MaxCap’s executive director of investment for NSW, Queensland and ACT.
AustralianSuper, which has an $11 billion property book, declined to comment.
Ashe Morgan Group and DMann Corporation are developing the project, with cornerstone investor Hong Kong-based Peterson Group providing equity “somewhere between 40 and 50 per cent”, Mr Law said. Work on site by Hutchinson Builders has begun, and completion is scheduled for mid-2021.
“We appreciate the focused and professional support of the entire MaxCap team in organising this facility which provides all the funding necessary to complete the project and allows the AM/DMann team to focus on delivering this landmark development,” said Ashe Morgan principal Mendy Moss.
The cost of the loan was competitive with bank, or authorised deposit-taking institution [ADI] lending, Mr Law said.
“The differential, if any would have been 0.25 of a per cent relative to an ADI,” he said. “But if it was 0.25 higher or lower, the compelling point for [the borrower] was one single source of capital.”
It took just three-and-a-half weeks from hearing the first presentation to the first drawing down on the loan, a process that would have taken months under traditional bank processes, said Mr Law, ANZ’s former global head of institutional property.
“There were four banks I’m aware of bidding on it and two non-banks,” he said.
“The banks had been assessing this this for more than one and a half months before we were asked into it.”
MaxCap, which last month secured a $600 million commitment from Dutch pension giant APG, is seeking to grow on the back of a move that it expects will see major banks pull back to 60-65 per cent of the commercial real estate debt market from their 74 per cent share in March, due to regulatory intervention and introduction of strong capital benchmarks as a result of tighter Basel III banking compliance rules.
“There’s always going to be a gap appearing over the commercial real estate debt market,” Mr Law said. “But more importantly, there’s healthy demand from institutional capital to fill that gap.”
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