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Why is the Qualitas share price rocketing 23% on Monday?

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The Qualitas Ltd (ASX: QAL) share price is starting the week off with a bang today.

This comes after the Australian alternative real estate investment manager secured commitments for a new fully discretionary mandate.

After opening at 1.675 a share this morning, the Qualitas share price shot to a high of $2.07, or 23% higher, in lunchtime trade. At the time of writing, the company’s shares are trading at $1.96 each, up 17%.

Qualitas receives financial backing

In a statement to the ASX, Qualitas advised it has secured commitments from a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA) for a mandate to invest $700 million on behalf of a new fully discretionary investment vehicle.

Under the terms, the mandate will be carried out through the newly created Qualitas Diversified Credit Investments (QDCI).

The mandate increases Qualitas’ total committed funds under management (FUM) to around $5 billion. This is focused on Australian commercial real estate (CRE) credit (74% of FUM) and equity (26% of FUM) opportunities.

In addition, ADIA will also subscribe for options to acquire new ordinary shares equating to 9.99% of Qualitas’ shares. This will be on a fully diluted basis, conditional on ADIA committing further incremental investment mandates totalling $1 billion.

The options will be exercisable in tranches if ADIA increases its investment mandates with Qualitas within the next two years. The exercise price will be based on the volume weighted average issue price (VWAP) of $2.50 per Qualitas share. However, this is subject to future issuances of Qualitas shares.

Qualitas group managing director and co-founder Andrew Schwartz said:

I am proud that such a well-regarded leading global institutional investor has chosen Qualitas for this significant mandate and has backed its belief in our business with options to acquire a meaningful stake in Qualitas.

We believe this decision is testament to the expertise and quality of Qualitas’ in-house origination, credit assessment and asset management skills in the Australian CRE private credit market.

Should the options be exercised, the additional capital raised will continue to strengthen our balance sheet providing additional capacity for Qualitas to warehouse opportunities and co- invest with our fund investors in line with growth in underlying FUM.

Qualitas price snapshot

Up until the end of May, the Qualitas share price moved on a gradual downtrend before freefalling 30% in the following weeks.

After hitting a 52-week low of $1.355 on 17 June, the company’s shares are beginning to make amends.

Based on today’s price, Qualitas commands a market capitalisation of roughly $593 million.

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