Blackstone Group has snapped up an 80-percent stake in property financing company La Trobe Financial for an undisclosed amount, in a move that will help the New York-based investment giant expand in Australia’s lucrative mortgage-lending market.
This deal comes as Australia’s push to control a bubble in its red-hot housing market, by reining in bank lending, forces some property developers in the country to look outside the regular banking system to secure financing.
The Blackstone-La Trobe partnership aims to focus on the A$1.7 trillion Australian mortgage loan market and service small to medium enterprises “who are finding it increasingly difficult to obtain credit from the traditional bank sources”, the companies said in a joint statement on Monday.
La Trobe will use the tie-up to attract retail investors for its A$2 billion Credit Fund and its A$4.6 billion mortgage loan portfolios, according to the statement.
Chief Executive Greg O‘Neil will continue to head the Melbourne-based company while Blackstone will appoint two directors to La Trobe’s board.
While Blackstone has been a prolific investor in Australian commercial real estate with about A$9 billion ($6.9 billion) in property purchases in the last seven years, the deal with La Trobe marks the private equity giant’s entry into small-business mortgage lending in the country, according to a spokeswoman.
The broader shadow banking market accounts for about 7 percent of Australia’s total financial assets, according to the country’s central bank.
These lenders are funding some developers at more than double the interest rate for the same type of loans that the country’s big banks were providing just a few months earlier, before regulatory pressure forced them to limit exposure to new projects.
Chief executive Greg O’Neill will retain 20% ownership and continue in his role while the existing management and executive team will also remain unchanged.
O’Neill said the opportunity for La Trobe to partner with Blackstone was the perfect fit for staff, customers and the business.
“The specialist credit space is experiencing a defining period of change and growth around the world right now and it is critical that we continue to build on our strong capital position, expand our networks and draw on global best practice,” he said.
“We look forward to working closely with them over the coming years to expand and substantially grow our retail and institutional investment programs and our specialist lending offerings.”
La Trobe Financial manages investment mandates in excess of A$13 billion, including a retail Credit Fund of almost $2 billion and over $1 billion of public RMBS bonds issued.
