Q How is the regulatory environment in Asia-Pacific creating opportunities for private lenders?
AP: Regulations are ever-evolving. On a broader perspective for private credit globally, is this a regulatory arbitrage, or are we looking at a sustainable business practice based on sensible regulations? When you look at Asia-Pacific overall, the markets have always been open to private credit, but there are a few nuances.
If you are a lender, it depends on who you are lending to – whether it is institutional or more regulated retail businesses. The other element is the requirement for money lending license and banking regulations. There are nuances in each country.
Our dialog with regulators, and also with investors, has given us strong conviction that private credit has great support from the regulatory environment. Essentially, the backbone of the private credit industry is to live symbiotically with the banking sector.
Nick Jacobson (NJ): As the Australian commercial real estate (CRE) private credit market becomes more institutionalised and a larger proportion of the total credit market, the expectation is that there will be increased regulatory oversight. However, this is likely to focus on those private credit providers active in the retail investor and consumer lending segments. Furthermore, at Wingate, we have been in the private credit investment management business for more than 20 years and have robust governance, compliance and risk management functions.
Q How can real estate private credit support ESG initiatives?
AP: Private credit can support green developments and conversions to make assets more sustainable, both environmentally and socially – crucial elements that are integrated into CLI’s platform. Sustainability-linked loans can be issued but they are not always the best solution for promoting sustainability initiatives, especially given the heterogeneous nature of the Asia-Pacific market.
NJ: As a jurisdiction, Australia is highly focused on ESG matters, and so it has to underpin your operating ethos if you’re going to participate and succeed in private credit here. Sustainability is built into the building codes so, to a certain extent, all lending ought to be supporting sustainability initiatives.
Q Who are the capital sources for Asia-Pacific real estate private credit, and how is the investor base changing?
NJ: Australia has become a familiar destination for international real estate capital, and that increasingly applies to CRE credit. As well as familiarity, Australia offers transparency, comfort with the legal system, the stability of the market and the growth of the market. We have seen investors from Asian markets including Singapore, Hong Kong, Korea and Japan take an interest.
AP: We see the larger institutional investors in Asia taking more interest in private credit, especially where they can invest in a theme and a platform, rather than a trade – as they have large pools of capital to invest. We also see growing interest from Asian family offices and high-net-worth individuals, with Singapore and Hong Kong being two centers for such investors.
US and European investors remain interested in Asia-Pacific credit. Certainly, the US offers a compelling opportunity to US investors at the moment, and therefore they are focused on their home base, but growth markets such as India still attract interest.
There are also European investors with exposure to Asia-Pacific real estate credit, and we expect to see more activity from them towards the end of the year.
