Where 600 Wealthy Families Are Putting Their Millions

“We see a lot of deals. We say no to probably 80 per cent of them.” For HMC Private Credit’s head of private credit Craig Schloeffel, separating the wheat from the chaff of deals coming across his desk is no mean feat. “Some of them are very quick no’s and others are more detailed reviews … there’s a lot of deals out there, particularly in the mid market, in that debt space that we’re in.” Formerly Payton Capital, the non-bank lender was bought by David Di Pilla’s HMC Capital about 12 months ago. The business has about $2 billion in assets under management and 80 per cent of the total book is residential, which, Schloeffel says, has strong fundamentals for continued growth. The non-bank lender is largely hunting deals in the mid-market space for senior debt of $10 million to $70 million. Schloeffel says there are fewer players in this space, and more builders. “We manage our pipeline pretty carefully,” Schloeffel says. “A lot [of deals] get knocked down upfront. “But deals that get to our investment committee, you would expect have a very, very high chance of going through because they’ve been through three or four property-and-risk teams to get to the point of investment committee.” ▲ HMC Private Credit’s Craig Schloeffel says green shoots are emerging in Melbourne as value creeps into the market. With offices across the country, Schloeffel says HMC Private Credit has a unique view of different geographic markets, as well as market intelligence and demographic data from the asset management side of the business. “We’re starting to see some great quality transactions in Victoria because prices have been anemic relative to the rest of the country for the last couple of years,” he says. “Relative value has crept back into Victoria and we’re starting to see that value for the developers creeping as prices are starting to rise slowly due to affordability. “Sydney has been very consistent. “We’ve got a project in Mosman that has a over-$60,000 per square metre-type value to it.” While south-east Queensland has remained a robust market compared with the Victorian capital, the non-bank lender was forced to tip a project slated for 99-101 Old Burleigh Road at Broadbeach into receivership this month. Growth Point Capital chief executive David Schuh bought up the 1300sq m site for about $24 million last year, and this month lost control of the asset after defaulting on loans. HMC Private Credit, which holds the senior debt, joined Vance Finance to tip the company, 99 Old Burleigh Pty Ltd, into receivership and appointed FTI Consulting’s Kelly Trenfield and John Park. Due diligence remains a key consideration in assessing non-bank lending deals, according to Schloeffel. ▲ Australian construction-industry insolvencies surged nearly 21 per cent last financial year to a new high. The start of the pandemic was a hairy time for builders and lenders, he says. “I think more than ever the due diligence being done on builders is very rigorous. “At the start of Covid when you said to developers and builders we want to do a deep dive on the builder financials, we want to get in under the hood, you would have pushback from the builder traditionally saying, ‘W ell, hey, you’re not lending to me ’ . “There was resistance, which just isn’t there now. Builders understand that you’re going to come and ask for DD … they’re getting more sophisticated, putting DD packs together.” Schloeffel says any deal more than about $30 million was subject to an external due-diligence process. More than 600 high-net-worth families make up the direct capital stack at HMC Private Credit, and largely domestic, but Schloeffel says Asian investors are looking to the Australian private credit market. “We are well advanced on our journey,” Schloeffel says. “We have already got, and have had for some time, some institutional offshore capital from Singapore. But we’re expanding that. “There’s a huge interest in Australia right now, particularly from Asia. I’ve just come back from a roadshow a month ago through Korea, Japan and Singapore. In each of the markets, they’re telling us, you know, we’ve heard about this private credit in Australia now and that it’s maturing.” ▲ Non-bank lending has continued to eat up market share, according to the latest data from Stamford Capital. As part of the acquisition by ASX-listed HMC Capital, HMC Private Credit has spent the past 12 months tightening its compliance frameworks, operational capability and governance. Recently, its CRE Pooled Investment Fund was awarded a 4-star rating from independent research house SQM. The high investment-grade rating indicates the fund is suitable for inclusion on most Approved Product Lists (APLs) that financial advisors can recommend to clients. The fund has outperformed its peer group by a reasonable margin with lower volatility according to SQM. The Core Fund is one of three distinct investment options within the broader HMC Private Credit CRE Pooled Investment Fund, alongside Cash Plus and Opportunity. Each option offers wholesale, family office and institutional investors a different risk/return profile, with the Core Fund specifically designed for a balance of income and capital preservation. The fund comprises a diversified portfolio of first-mortgage loans secured against Australian real estate, with a strategic tilt towards the residential sector. The portfolio spans various real estate asset types, development stages, and major eastern seaboard locations, offering investors exposure to commercial real estate debt opportunities. “This reflects the strength of our institutional-grade platform, our investment strategy and the disciplined approach our team takes to credit risk management,” Schloeffel says. “Over 84 per cent of that core fund that got rated is in the residential asset class, and that’s a combination of all facets of residential, from land ready for construction, greenfield land under construction, infill land and apartments, townhouses, housing, so the whole spectrum of residential. “But what we’re seeing across the major markets, and what we’re leaning into is that asset class in the mid market which is seeing probably, faster growth than the top end.” Parent company HMC Capital manages more than $19 billion of assets under management (AUM) across real estate, private equity, private credit, digital infrastructure and energy transition strategies. HMC Capital says its competitive edge lies in the ability to execute large, complex transactions, which has been pivotal to the rapid growth of its funds management platform.

Where 600 Wealthy Families Are Putting Their Millions

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