Qualitas launches build-to-rent fund
A new fund has been announced by Qualitas to finance the construction and management of energy-efficient, low-emissions, build-to-rent (BTR) residential buildings. Backed by up to $125 million from the Clean Energy Finance Corporation (CEFC), the initiative aims to boost clean, green rental stock and extend the benefits of clean energy to Australian renters.
The Qualitas Build-to-Rent Impact Fund (QBIF) is reported to be Australia’s first property debt fund to elevate minimum sustainability criteria into its investment criteria, as well as being Australia’s first dedicated BTR debt platform.
The fund will finance housing that meets strong sustainability standards and reduces greenhouse gas emissions by at least 35% compared with the current building code.
BTR — also known as multi-family housing — refers to purpose-built residential rental accommodation, owned by institutions and designed to meet the needs of residents. Although a new concept in Australia, the asset class is well established in the US and Europe, and more recently the UK.
Qualitas Managing Director and Global Head of Capital Tim Johansen said QBIF would target strong and growing demand for residential rental accommodation, while supporting Australia’s transition to a low-carbon future.
“QBIF will help deliver quality housing stock into the growing rental market. Around one in three households in Australia are renters, and this number is increasing. Yet new housing starts have fallen in recent years, putting pressure on future supply and rental prices. It’s clear that a new approach is needed and BTR is part of the solution,” Johansen said.
“Qualitas is also determined to accelerate Australia’s transition to a low-carbon economy and the ‘green’ overlay of the fund will help reduce emissions generated by residential housing.”
CEFC CEO Ian Learmonth said that QBIF was a significant opportunity for the CEFC and private sector investors to contribute to a low-emissions foundation for an emerging market sector.
“The CEFC is committed to supporting innovative investment products like QBIF that attract private sector investment into projects that reduce carbon emissions while delivering attractive returns,” Learmonth said.
“We look forward to leveraging Qualitas’s track record in real estate finance and debt funds management position to execute the fund’s strategy.”
Buildings account for more than 50% of Australia’s electricity use and almost a quarter of carbon emissions, with residential property driving about half those emissions.
To qualify for QBIF finance, projects must demonstrate minimum sustainability standards, including a 7-star average NatHERS rating and a 5-star NABERS for Apartments Energy rating, as well as criteria for appliances and solar generation on the available roof area. These standards will be achieved through a combination of passive design, upgraded building fabrics such as insulation and glazing, high-efficiency HVAC plant, energy-efficient appliances such as dishwashers and refrigerators and on-site solar systems.
“BTR is unique because it gives developers the opportunity to invest in energy-saving initiatives that generate value over the property’s life by reducing operating costs and the exposure to rising energy costs, while contributing to higher valuations,” Learmonth added.
“A cleaner, greener built environment offers long-term benefits for investors and the community because of the significant low carbon dividend.
“Energy-efficient housing can reduce pressure on the electricity grid, while attracting a growing number of residents who value the benefits of more comfortable housing, lower energy bills and a lighter carbon footprint.”
Johansen said that the cornerstone commitment from the CEFC was instrumental to launching the fund.
“We are pleased to have the support of an institutional investor such as the CEFC who shares our commitment to the BTR sector and a lower-carbon economy. We are also in discussions with a range of local and offshore institutional investors who are attracted to the BTR opportunity in Australia and the fund’s sustainability impact.
“From an investor’s perspective, BTR provides significant benefits within real estate and credit portfolios, including low volatility [and] low correlation to other asset classes, and a diversified credit risk thanks to a large tenant base. Accessing the asset class through secured debt also provides structural protection for investors.
“We believe the fund will be attractive to investors seeking consistent income in a low rate world,” Johansen said.
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