Private credit crucial as housing crunch bites developers, Metrics Credit Partners says

Metrics Credit Partners and Billbergia are developing in Sydney’s Concord.

Private credit has a crucial part to play in helping to solve the housing crisis, according to leading operator Metrics Credit Partners.

The company, which has a pipeline of more than 12,000 homes across Australia, has urged a focus on the industry’s role in providing credit to housing developers while banks have cut back their exposures.

Despite planning reforms, developers have warned the withdrawal of banks has made many projects difficult to stack up, even when they are approved, with rising costs feeding into the problem.

Metrics managing partner Andrew Lockhart says private credit players have a substantial role to play both in providing finance and also in undertaking joint ventures with top tier developers. “Australia needs housing; private credit does have a role,” he said.

Mr Lockhart said the sector delivered both debt and equity at critical junctures for the large projects needed to boost supply.

He holds concerns that top operators will be swept up in broadbrush criticisms being levelled against the sector.

“What is missing in the debate is … let’s look at the track records; let’s look at the performance of different firms,” he said. “Are they delivering true to label outcomes for investors? And are they delivering an important source of capital for real estate operators to be able to build the houses that are necessary for the country?”

Metrics has been at pains to differentiate itself from the problems that have claimed fringe operators in the private credit sector and prompted the corporate regulator to act against some schemes.

Metrics is not immune from market turmoil but says it has the capacity to step into troubled projects and get them back on track. “Our view is, if we’ve got a problem with an asset, we need to take control of it,” Mr Lockhart said, arguing this could turn a situation around from investors facing losses into ones where they may profit.

His comments come after the Australian Securities & Investments Commission in October issued a review into the $200bn ­private credit sector, which noted practices ranging from hidden fees and conflicts of interest to loan losses not being properly reported.

Mr Lockhart rejects the characterisation of private credit operators as a “homogenous” group.

“We think that the investment opportunity in real estate has been a very attractive market opportunity for clients, particularly as the banks withdrew in the mid-2000s,” he said.

Metrics has raised a significant capital from offshore investors, most notably recently via Townsend and South Korea’s National Pension Service. They were attracted by the ability to get an exposure to the real estate equity business, Mr Lockhart said.

The company manages about $16bn worth of real estate debt investment and also has a growing presence as an equity investor.

Metrics this week unveiled its latest venture with Billbergia for Concord Central, a $2.2bn high-rise scheme in Sydney’s inner west. Even ahead of the Concord deal, it had 10,393 lots either under construction or subject to planning. Of these, around 6027 are under construction and 4366 subject to planning.

“We have a number of other lots that are subject to rezone outcomes,” Mr Lockhart said.

Metrics is involved in residential development projects that are both under construction and also subject to planning. In NSW, it has around 5957 residential lots, either in construction or subject to planning, and they span apartments and land subdivisions.

The company is involved in sites in Chatswood, also with Billbergia, and St Leonards, with another developer, Dasco. It is also undertaking a $1.8bn project in Five Dock with Deicorp.

In Victoria, it has about 2022 sites under construction, and 1320 are subject to planning. In WA it has about 1020 lots with 470 under construction and 550 subject to planning. The company also has a focus on industrial sites and it has been active in Queensland with projects at Coomera, Brisbane and Swanbank and Helensvale.