Qualitas (ASX:QAL) management told investors its first-half FY2026 performance reflected “another strong half,” highlighted by record deployment, higher fee-earning funds under management (FUM), and expanding margins driven increasingly by recurring funds management earnings rather than balance sheet income.
Record deployment and rising fee-earning FUM
Group Managing Director and co-founder Andrew Schwartz said Qualitas deployed AUD 3.7 billion during the half, up 57% on the prior corresponding period, driving 69% growth in transaction fees. Net deployment was a record AUD 2.2 billion over six months, which Schwartz said was supported by “subdued portfolio attrition.”
Deployment was heavily driven by repeat business. Schwartz said 76% of total deployment came from repeat borrowers, including a AUD 1.2 billion construction credit investment, while 28% came from follow-on investments such as renewals, facility increases, and later-stage development funding.
Institutional mandates and market conditions
Global Head of Real Estate and co-founder Mark Fischer said private credit fundraising conditions were generally more difficult, particularly in Australia, where heightened regulatory scrutiny led to more discerning investor allocations. Fischer said flows increasingly favored “institutional platforms such as Qualitas,” and the firm secured new mandates and increased allocations from existing investors during the half.
Schwartz cited two new managed fund mandates from institutional investors: one from “one of the world’s largest pension funds” for Qualitas’ private credit strategy, and another from a global pension investor in its build-to-rent strategy.
Fischer framed competitive dynamics as shifting in Qualitas’ favor, noting the firm maintained discipline during a period of heavy private credit capital raising and increased competition. He said newer entrants were now retreating as portfolio challenges emerged, while Qualitas delivered record deployment while maintaining a “high-performing portfolio.” Fischer added that more than 80% of fee-earning FUM subject to performance fee eligibility was exceeding hurdle rates.
Residential focus, larger transactions, and diversification
Fischer said residential—particularly multi-dwelling assets—remains Qualitas’ preferred exposure due to structural undersupply and resilient demand. He described a shift in demand toward apartments as affordability pressures mount, with apartments increasingly the only viable ownership option for more buyers. Fischer cited data showing apartment commencements and approvals increased 18% and 23% over the past year, respectively, while detached housing activity remained subdued.
He also highlighted growing project scale, saying the average number of apartments per building increased 64% over the past years, which, combined with higher construction and labor costs, increases the amount of capital required—supporting Qualitas’ deployment opportunity set. Fischer said Qualitas maintained an 11% market share in financing multi-dwelling developments over the 12 months to September 2025, and market share for developments exceeding 160 apartments increased to approximately 18%.
While residential represented 82% of fee-earning FUM, Fischer said Qualitas deployed into industrial, retail, and office assets in its credit portfolios during the half, and into build-to-rent in its equity strategies. He said the pipeline includes a large office repositioning investment approved by the investment committee, and management indicated transaction activity early in the calendar year had been stronger than typical for January and February.
In Q&A, management also discussed large-loan opportunities and risk. Fischer said the previously referenced large office recapitalization deal had progressed from mandate stage to investment committee approval and was in the final stages of closing. He said pricing and terms can be more favorable on very large deals because borrowers prioritize “capital certainty” and competition is thinner at larger check sizes. On concentration risk, Fischer emphasized these transactions sit within large institutional portfolios and that Qualitas’ exposure as manager is through its co-investments, which are smaller.
Financial results, margins, performance fees, and dividend
Chief Financial Officer Philip Dowman reported normalized net profit after tax of AUD 21.1 million and statutory net profit after tax of AUD 20.7 million, up 30% and 27%, respectively, on the prior corresponding period. Normalized net profit before tax was AUD 30.2 million, up 30%, and management reaffirmed FY2026 net profit before tax guidance of AUD 60 million to AUD 66 million.
Dowman attributed the result to four main revenue drivers:
- Fee-earning FUM growth of 38% to AUD 10.9 billion, contributing to a 28% lift in base management fees.
- Record deployment of AUD 3.7 billion, driving record transaction fees of AUD 12.9 million (up 69%).
- Net performance fees of AUD 5.0 million (up from AUD 2.9 million).
- Balance sheet investment earnings of AUD 15.3 million (up 15%), supported by higher drawn co-investments.
Management said base management fees now represent 70% of funds management revenue, underscoring earnings stability. Funds management EBITDA rose 42% to AUD 34.3 million, while net funds management revenue increased 53% to AUD 19.7 million. Funds management EBITDA margin expanded to 55%, which Schwartz said was driven by operating efficiency from the core funds management platform, rather than principal income as in a prior period.
Performance fees were a prominent theme. Schwartz said approximately AUD 12 million of previously accrued performance fees were realized in cash during the half, and the unrecognized performance fee pool grew to AUD 99 million. Dowman also noted cash collection of AUD 12.1 million of previously accrued performance fees. In Q&A, Dowman said there was a small performance fee reversal in the first half and, “all other things being equal,” the performance fee contribution would be expected to be higher in the second half as a result.
Qualitas declared an interim fully franked dividend of 3.5 cents per share, up 40% year-on-year. Dowman said corporate costs rose 15%, which he characterized as modest relative to revenue growth, attributing part of the increase to investments in data standardization and AI initiatives.
On the balance sheet, Schwartz said cash balance at the half was AUD 33 million, and that AUD 80 million of underwriting positions held pre-31 December had been repaid, with current cash in excess of AUD 100 million. The company’s only corporate debt position, the QRI manager loan, reduced to AUD 19 million from AUD 20 million.
Outlook: second-half skew, interest rates, and AI initiatives
Schwartz said Qualitas expects half-on-half growth in base management fees in the second half, citing a higher opening fee-earning FUM position and construction loans where management fees increase as projects progress. He added that higher co-investment drawdowns and a recent rate rise were expected to support principal income growth in the second half, while performance fees from credit funds were expected to increase as funds mature, with recognition and cash receipts becoming more consistent.
On interest rates and non-residential opportunities, Fischer said rising rates can reduce debt availability from traditional lenders due to interest cover constraints, creating “gaps in capital structures” that private credit can address through whole-loan or mezzanine-style solutions. Schwartz added the firm had grown through prior interest rate cycles and that credit spreads can rise alongside rates.
Management also highlighted ongoing investment in artificial intelligence. Schwartz reiterated his enthusiasm for AI, describing it as an efficiency enabler across data collection, analysis, and internal processes, while Dowman said the company is assessing “agentic AI systems” and aims to deliver internal applications over the coming year to support scalable execution and measurable productivity benefits.
In closing remarks, Schwartz reaffirmed FY2026 guidance, including earnings per share of 13.9 to 15.3 cents (excluding certain mark-to-market movements and fund capital raising costs as specified by management), and said the firm would continue pursuing organic and inorganic opportunities with a focus on shareholder value.
About Qualitas (ASX:QAL)
Qualitas is a real estate investment firm which focuses on direct investment in all real estate classes and geographies, acquisitions and restructuring of distressed debt, third party capital raisings and consulting services. It seeks to provide bridge loans in the major markets of the Australian east coast, and particularly the medium and high density residential development sector. Qualitas is based in Melbourne, Australia with an additional office in Sydney, Australia. It operates as a subsidiary of Qualitas Group.
