Apartment developers to benefit as Apollo boosts reach of property lender MaxCap

The US private equity firm Apollo Global Management has bought a 50% stake in MaxCap, the Australian real estate debt specialist that lends extensively to apartment developers. Wayne Lasky and Brae Sokolski, who founded MaxCap 14 years ago, have each sold 25% stakes to Apollo. They will continue to run the business under the MaxCap brand. It is envisaged that the non-bank will accelerate their business to better compete with local banks. MaxCap recently provided Franze Developments with a $97 million first-mortgage facility to build its two-tower residential and hotel complex in Geelong which will have an end value of $200 million. It investment arm has financed a 16-level apartment project in Sydney’s Chatswood with developer Central Element. MaxCap provided recent funding to the Chateau project in Castle Hill, by developer Stonebridge Projects. On Queensland's Gold Coast Maxcap provided a first mortgage construction facility to S & S Projects for the 11-storey luxury boutique apartment project, Awaken. The price of the Apollo transaction has not not disclosed, but IPE Real Assets reported that the deal values MaxCap “north of $300m.” Lasky told IPE Real Assets that the deal was “industry-defining” as it enabled the firm to compete directly with traditional lenders in the $300bn commercial real estate debt market. “Apollo has given us the chance to challenge the anachronistic notion that the banks will always be the primary source of real estate credit, and to capitalise on the real tectonic shift in credit formation [coming] from super and pension funds, insurers and family offices,” he said. “You have US$18trn of global supply of negative-yielding bonds, so it makes sense for that changing formation of credit to be searching for yield. Since its inception, MaxCap has written more than 450 transactions valued at $12bn. Over that period, Laksy said, it had delivered full principal and interest to investors, which included Dutch pension fund investor APG and AustralianSuper. The Australian Financial Review reported the big four banks account for about 70 per cent of the commercial real estate lending market but due to regulatory requirements such as holding more tier 1 capital on their balance sheets, their exposure would likely fall until it was about a 50-50 split with non-bank lenders.