Private debt opportunities in property

Coming next, we have the Divisional Director and Head of EG Private Wealth, Mr Rodney Walt.

EG is a prominent independent funds management firm that specializes in Australian real estate.

Their division, EG Private Wealth, has been assisting wholesale investors for over two decades, combining the agility and drive of an entrepreneur.

Recently, they formed a partnership with M Squared, an alternative credit specialist to provide investors with private debt opportunities.

EG's private debt deals, primarily goal is to deliver returns of 8 to 12% per annum to investors.

They achieve this by focusing on high-end residential and industrial real estate.

maintaining LVR alone to value ratio ranging from 50 to 75%.

Rodney is a divisional director and head of EG's private wealth division.

During his tenure, Rodney has been at the forefront of EG's expansion into PropTech and Fintech innovation and acquisition, which notably led to EG's investment in global technology platform Willow Inc.

Rodney is going to give us an overview of EG private wealth and share his knowledge on private credit.

Welcome, Rodney.

Thank you very much.

Great to be with you and thank you all.

I look forward to sharing my presentation and telling you a little bit about who EG is.

So EG is a leading independent real estate funds management firm specialising in Australian real estate.

We invest in, develop real estate on behalf of our institutional investors and wholesale clients to generate outstanding returns

and lasting positive social impact.

EG's business has grown off the back of its technology platform PRISMS, which is our proprietary property risk management software, which was created in 2008.

It has been the software used in assessing, identifying, and pricing risk in real estate for equity acquisitions.

It is the reason today that we manage north of 5.1 billion in assets under management, have a development pipeline of 3.9 billion, 20 years of experience,

and 112 plus staff across two countries.

The software has led to us delivering a realized return of 16.7% of IRR over the past 20 years for our institutional investors.

EG's disciplined, data-driven approach to risk management has enabled us to safeguard our investor funds while maximizing returns.

EG established private wealth to introduce income producing and capital growth opportunities for our exclusive network of wholesale investors and family offices.

We've been able to create bespoke commercial real estate equity and debt opportunities for our clients.

In the private credit space, EG established its private debt division focusing on institutional investors in 2020.

We recognized that there was also an opportunity for our wholesale investors

within private debt markets.

And since then, EG has joint ventured with M Squared to provide our wholesale investors with access to private credit opportunities.

M Squared has been around for H plus years and has a strong track record in bringing extensive knowledge to the non-bank lending market, along with access to borrowers and brokers.

EG will integrate its PRISMS platform in providing an assessing risk in credit quality to safeguard our investor funds.

and we are heavily focused on the downside risk.

We're able to underwrite deals with an equity lens, utilizing our PRISM platform and assessing the risk based on vacant possession and owning the asset.

We continue to provide our investors with a personalized service in delivering these outcomes and returns.

How does our credit assessment process work?

We really believe in the five Cs, understanding the collateral,

the character of the borrower, the capacity for them to repay, the cash flow, and the competency.

As we all say, the best loans are those that get repaid, and underpinning this whole platform is our PRISMS platform.

EG's disciplined, data-driven approach to risk management has enabled us to safeguard our investor funds whilst maximizing those returns.

In the private credit space, we've really targeted two areas, and the two areas that we will continue to focus on

the current market is in the high-end residential first mortgage borrowing.

So these are typically bridging loan facilities in the high-end locations of Sydney's eastern suburbs, lower North Shore and inner east of Melbourne.

The typical borrower is a high net wealth who is looking to upgrade to their next property.

They are needing time to bridge between the two loans and the current banking sector is really struggling to provide loans for borrowers where they are not able to meet the cash flow.

but we understand the inherent value in the two properties and the significant capital that they have invested in both properties.

By providing a first registered mortgage personal guarantees, we're able to provide our borrowers an opportunity to upgrade to their new properties.

And the loan sizes in this space is typically in that eight to 25 million mark.

And we're leveraging between 75 and 75%, including all capitalised interest.

And the average duration is in the six

18 months.

And the target returns that we'll be offering our investors in that is 8 to 12%.

And that really largely depends on the level of LVR or loan to value ratio that the borrower is looking to borrow against those properties.

With the influx of people into Australia, we're still very confident in these sectors and providing our investors the opportunity to in the private credit space.

The second sandbox that we'll be focused on is very much in the industrial real estate logistics space with owner occupiers who are looking to reposition their business post COVID.

So we're focused on established locations in the East Coast, owner occupies first mortgage with those typical properties, those industrial locations, having no gantries or chemicals, personal guarantees,

loan to value ratios in that 55 to 70%, the average loan size of the 10 to 30 million with the duration of 12 to 36 months.

And the target return that investors can expect from these opportunities is in that nine to 12%.

In terms of recent transactions, we've recently provided a bridging facility opportunity for our investors.

The property was an Eastern suburbs location with a valuation of $10.55 million.

The borrower is looking to borrow 7.1 million in a bridging loan facility.

So loan to value ratio at 68% on initial term.

And that was over a term of nine months with a minimum term of four months.

Our investors who invested in this opportunity are now currently receiving close on 9.5% variable, which means that they are receiving a return based on the RBA cash rate of 4.1% currently.

plus a margin of 5.4% and that is net of fees and that is paid monthly to our investors.

In terms of the private credit team, you have myself, Rodney Walt, who've been part of the EG team for over 13 years.

Chris Pack, who is our Joint MD and Chief Investment Officer with 20 years of experience.

Chris has managed over 10 billion in real estate equity and debt transactions.

And during the GFC, he completed

work out of the Howard mortgage 3 billion book, returning all equity to investors.

He's deployed over a billion dollars in loans for super funds and sovereign wealth funds.

Paul Mirren and Paul Maliotis are the two founders of M squared and for over the past eight years they've delivered and created extensive opportunities for their clients.

Paul Mirren is

respected and recognized for his economic views and ability to mitigate risk through well-considered structuring of the products.

Paul Maliotis is well regarded and has a vast network of trusted industry contacts.

Paul's wealth of on the ground experience has a wealth of on the ground experience in the private lending space.

So in summary, if you're looking for a trusted proven performer with the ability to provide private credit first mortgage opportunities with loan to value ratios in that 50 to 75%, including capitalised interest, flexible loan terms of six to 36 months, please reach out to me, Rodney Walt or my team to assess and access opportunities for our wholesale investor market.

Thanks very much.

Thanks, Rodney.

We have some questions for you.

The first question is, why private debt?

Why private debt?

Well, at the moment, you've got high inflation and interest rates being relatively high.

And that is proving quite challenging in finding equity opportunities in the commercial real estate sector to invest in.

We believe that at the moment, private credit provides our investors with a good risk adjusted return.

And so we understand where the risk free rate is going to land.

there is a better opportunity for our investors to be investing in private credit.

Right, and why EG for private debt?

Why EG for private debt?

I suppose a lot of that really comes down to our PRISMs platform, understanding those opportunities with an equity lens.

So obviously, we've got the n squared guys who have long, long established relationships and opportunities on and understanding on the private lending space.

But I suppose we bring an opportunity we were able to access and look at those opportunities with an equity lens, understanding what would happen if we had vacant possession of those properties.

Many of those opportunities that we've looked at recently, we've actually looked at acquiring and where we're lending to those properties and borrowers, we understand what the risk adjusted returns might be for our investors.

And where will EG target investments in the private credit space?

So at the moment, we're really all focused on that high-end residential space, as well as the owner-occupier industrial space.

In time, I have no doubt that EG will expand into looking into other private lending opportunities, be it construction.

We obviously have our own in-house DM and PM team, our own urban planning team that could assist in those opportunities.

And where we do expand into that space, it will be at the right time.

Right now, we believe that the sectors that we are targeting are the right space on a risk-adjusted return for our investors.

Well, thank you, Rodney.

Great to see you.

Take care.

Thank you very much.