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Dutch pension fund APG completes $600 million MaxCap agreement

Aug 31, 2022
MaxCap provides a $100m+ construction facility to Central Element

Dutch pension fund APG has completed the $600 million mandate with non-bank lender MaxCap Group it agreed to three years ago and given itself the option to double that exposure to $1.2 billion, tapping the growing demand for funding at a time when banks are holding back.

The asset manager has exercised the option it took out in 2019 to invest a second tranche of $300 million for first-mortgage loans across all real estate asset classes with MaxCap, which last year sold a half stake in itself to US Apollo Funds Management.

APG funding, managed by MaxCap, is behind the development of Central Element’s Pienza Neutral Bay Village in North Sydney, which will have a gross realisation value of $190 million.  

As borrowing costs rise globally and uncertainty increases, institutional funders are racing to seize the opportunities created by project funding demands that have not let up.

News of the $300 million increase from APG comes days after Apollo itself committed nearly $1 billion to also tap the demand for construction facilities and first mortgages on land, and a week after rival Qualitas secured a $700 million investment mandate from the Abu Dhabi Investment Authority.

“Bank underwriting is once again shrivelling up,” MaxCap executive chairman Wayne Lasky told The Australian Financial Review.

“There’s heightened volatility and heightened risk and more challenges in the public markets, so increasingly more investors and borrowers are looking to us.”

But it is not clear how quickly APG will increase its funding placement again. Mr Lasky gave no time frame, simply saying the commercial intent was to continue to build the partnership between APG and MaxCap and accelerate delivery off the back of the past three years.

In a statement, Hong Kong-based Graeme Torre, APG managing director and head of real estate for Asia Pacific, said the pension fund was pleased to deepen its partnership with MaxCap.

“Commercial real estate debt, as an institutional asset class in Australia, is a proven strategy that offers strong risk-adjusted returns for the benefit of APG’s pension fund clients and their participants,” Mr Torre said.

Higher borrowing costs and inflation are slowing the pace of deals in commercial property. Deal flow fell by more than one-third to $15.2 billion over the first half of calendar 2022, CBRE figures last week showed.

But in the development space, clients were increasingly gravitating towards non-bank lenders, Mr Lasky said.

“Borrowers are starting to shed their concerns about price in recognition of certainty and the flexibility that private non-bank funding can offer,” he said.

Investors were also looking for fund managers able to operate in more difficult times, he said.

“What those investors are looking for is managers able to source their own deals with high-quality operators in the market and those with proven institution-grade platforms that they can underwrite through the cycle and deliver excess returns,” Mr Lasky said.

Link to original article here.