New investment fund set to fill lending breach

One of Australia’s best-credentialed and longest-running property empires is expanding into development finance, with current market conditions providing a strong opportunity to fill a credit void as traditional lenders retreat from the uncertainty created by the COVID pandemic.

Corsair Investment Management is the latest evolution for the Buxton family property empire, which spans back 150 years and includes well-known businesses such as Buxton Real Estate, Becton, MAB Corporation and Hamton.

The development and real estate heritage is complemented by the rich funds management experience of chairman Michael Fowler, the former founding partner of non-bank lenders MaxCap and the Treasury Group of Companies.

CIM has a substantial amount of funds under management, from the Buxton family’s investment office, institutional investors and other high-net-worths, and will provide property loans and equity for developments nationally.

The lender will focus on transactions valued from between $5 million and $10 million, all the way through to major projects worth hundreds of millions of dollars.

Mr Fowler said the concept for CIM had been in the works for quite some time, as Australian Prudential Regulation Authority lending rules had created a significant credit squeeze across property markets in recent years.

"The property market had been having a pretty decent run, particularly on the eastern seaboard of Australia, and we thought there would be a correction and there would be the right time to invest up," Mr Fowler told Australian Property Investor Magazine.

"We made that decision this year, and putting together an organisation such as Corsair Investment Management has taken us some months."

Australia's credit squeeze, Mr Fowler said, had been exacerbated by the coronavirus pandemic, which increased conservatism among many lenders and created an opportunity for non-bank players to step into the void.

“Banks tend to step back from the table when there is uncertainty, and COVID has delivered massive uncertainty,” he said.

“So you are probably finding a lot of existing customers of the banks that still want to develop, they’re still selling their product, but they can’t get access to the gearing levels that traditionally they were getting access to.

“There are two types of developers at the moment - you’ve got the developers who are finishing off what they are doing and have a strong balance sheet so they are planning their development stock over the next five or 10 years, they’ll be looking at opportunities. 

“Then you have got others who maybe don’t have the strong balance sheet that are restricted in what they can do because of funding right now. It’s an interesting dynamic, that’s for sure.

“We are cautiously optimistic and we take a long-term view.”

Mr Fowler said CIM would provide a unique proposition in the non-bank lending space, with the Buxton family’s development experience providing a high level of risk assessment expertise not present at other firms.

Also joining Mr Fowler at CIM are Stephen Buxton, who takes up a directorial role, while former Westpac executives Robert Altson and Chris Moyle also take high-level positions.

Mr Fowler said he believed that while there was a relative shortage in available capital in Australian, there was still strong potential for long-term returns across sectors less affected by the pandemic.

“We are not a one year proposition, we take a 10-year view, and we think that coming out of the COVID crisis that there is no doubt that there is opportunity, you just need to manage the risk to seize that opportunity,” he said.

“Construction is off, but we are seeing construction in certain areas, like aged care and residential. 

"COVID is no doubt hitting the obvious sectors like retail, hospitality and tourism, but Australia is relatively underbuilt. We are seeing residential property on the eastern seaboard, in that middle income bracket, having a decent run. 

“And you are seeing developers refinancing to gear up to be able to buy sites that they see in a downturn. 

“Good developers do buy when markets come off, so we are seeing that activity as well.”

From an international perspective, Mr Fowler said the relatively cheap Australian dollar and the national success with the COVID pandemic as compared to other nations had made Australia attractive for offshore investment.

“There are fund managers out there internationally that see Australia as being insulated entirely, and we have been to a certain degree when you look at our numbers, therefore the rebound might be quite dramatic,” he said.

“There are large institutions investing in Australia and looking to team up with various fund managers, not just in the commercial property sector, but across the board, and that’s a good thing for Australia.”