Private real-estate credit is booming, so pick the right investment manager
Across Australia, non-bank lenders are helping to ease our nation’s living and logistics pressures. IDA is one of those lenders supporting property developers in delivering homes, communities, retirement options, and other real assets across our living and logistics sectors
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Once a niche investment, private credit is fast assuming a core role in portfolios. The shift is the result of a void left by banks. Since 2009, banks in Australia have halved their commercial real estate lending from 10% to 5.5% of total assets, according to Knight Frank. In turn, other research shows non-bank lending for commercial real estate is expected to continue growing from an estimated $80 billion in 2024 to $160 billion. Investors are well advised to apply scrutiny. An influx of new managers continues to enter the market, underscoring the importance of manager selection.
Choosing a manager with experience, specialist expertise and integrity is critical. Adam Kaye, founding partner and managing director of IDA, a specialist commercial real estate private credit and investment manager with a strategic investment from a fund managed by Macquarie Asset Management, outlines three core guiding principles investors should consider before selecting their preferred manager.
How aligned is the manager?
Recent investigations into the sector note that whilst private credit is a critical element of Australia’s overall credit supply, the difference in how well-designed, how well-built, and how well-run your manager is can be wide enough to make a material difference to investor outcomes. It’s therefore critical to understand your manager’s motives, behaviours, track record, and processes to understand what drives their ultimate decision-making.
Sixteen years after founding IDA and participating in transactions with aggregate end values exceeding $6 billion, that discipline and alignment have been tangible from the outset, with all three partners investing the vast majority of their personal wealth in IDA and the funds it manages, alongside the clients they serve.
Are the product design and objectives clear?
For most investors, new markets carry many unknowns. “There’s a lot of lip service paid in the market to practices around compliance, governance and transparency,” says Kaye. In a recent report, ASIC warned of opaque fees, complex interest arrangements and ambiguous terminology. As a client-first business, IDA welcomes ASIC’s attention to the sector. “We make sure what we offer is fit for purpose and with a purity of product design which enables investors to allocate their capital directly in line with the risks they are willing to accept.”
How experienced is the manager?
Commercial real estate is a dynamic marketplace, shaped by shifting costs, changing tastes, and broader global forces; therefore, it’s important to know how quickly the manager can react and how capable their team is of managing market cycles.
“Subject matter expertise in real estate is not a credential earned in a short space of time; it is a capability to be demonstrated through decisions made across multiple market cycles over many years in the category, including the difficult ones,” says Kaye.
IDA’s insights stem from a dual market role as both a credit provider and, independently, a direct market participant. The investors best positioned to benefit from this market are those who do the work to distinguish between managers equipped to deliver on their promises and those merely adept at describing them.
Learn more about commercial real estate private credit investment opportunities at ida.com.au
Views expressed are those of IDA Securities Pty Ltd, ACN 155 991 585 AFSL 418 895. Intended for wholesale investors only (within the meaning of Corporations Act 2001 (Cth). For general information only. Does not constitute financial product advice or a recommendation to invest. Independent professional advice should be obtained prior to making any investment decision.
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