CRE Debt features

Portfolio Diversification Benefits

Low or negatively correlated returns compared with direct real estate and equities markets, while typically outperforming during periods of economic downturn.

The market for real estate financing moves in parallel with investor demand for real estate, which is driven by long-run macroeconomic trends rather than the business cycle.

Significant Risk-Adjusted Returns

Under conservative modelling assumptions, the alpha of MaxCap’s total CRE loan book averaged 11.7%pa return with annualised volatility of 1.5%.

Alpha opportunities are expected to persist as Australian CRE finance markets navigate the current economic conditions. 

Investors are provided excellent risk-adjusted returns in a historically low-interest rate environment.

Asset class performance resilience has been demonstrated throughout COVID-19.

High Barriers to Entry

CRE loans are idiosyncratic in nature and require thorough due diligence and structuring of risk management prior to investment.

Large, complex and non-homogenous CRE debt originated in private markets often cannot be readily securitised.

Once commenced, loans require ongoing active management.

Downside Protection

CRE debt does not occupy a first-loss position, with the typical LTV ratio being 55-65%.

Investors’ positions are thereby shielded from negative price movements by the equity holder.

Ongoing monitoring and information undertakings ensure MaxCap is able to step in early to manage non-performing loans and mitigate potential losses.