Alternative manager to establish $5bn private credit platform

Alternative asset manager HMC Capital has announced it will acquire private real estate debt manager Payton Capital in a bid to establish a $5 billion private credit platform.

In an ASX presentation, the firm said it wants to establish a diversified private credit platform over the medium term covering real estate, corporate, mezzanine and infrastructure private credit investment management. 

HMC Capital currently has $10 billion in assets under management and wants to double this in the medium term.

The strategic rationale of launching a private credit platform is that there is a $350 billion addressable market opportunity in Australia over the next five years, more superannuation funds are allocating to the asset class and the current environment of strong credit risk premia is a “golden period” for private credit.

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Australian private credit is expected to grow from $188 billion in 2023 to $346 billion in 2028, the firm forecast.
To achieve this, it will acquire Payton Capital and has appointed Matt Lancaster, a former senior managing director at Macquarie, as chair of the platform. Payton CEO David Payton will remain with the business for 12 months during transition until a replacement CEO is appointed.

Payton Capital was founded in 1966 as an accountancy practice but rebranded in 2012 as a private real estate debt manager with $1.5 billion in assets under management and 70 staff across Melbourne, Sydney and Brisbane. Following a 12-month screening process, the acquisition is expected to settle in July 2024.

It sits alongside Qualitas, Metrics Credit Partners and Apollo as a credit real estate debt asset manager.

To fund the Payton acquisition, HMC is undertaking a $100 million fully underwritten institutional placement and $30 million non-underwritten security purchase plan to raise up to approximately $130 million.

There is an opportunity to institutionalise the Payton platform and investor base, HMC said, and grow market share with the firm currently holding 500 platform investors and two unlisted funds in Payton Pooled Investment Fund and Payton Select Investment Fund.

It particularly favours Payton’s diverse capital sources, multiple revenue sources and high velocity and high return.

“A high touch asset management model enables Payton to capture attractive management fees via active management of relatively short tenor / high velocity loan assets which are less commoditised and deliver attractive risk adjusted returns for investors.”

Looking ahead, it seeks to organically build internal capacity in new credit strategies including mezzanine, corporate, infrastructure and structured lending. In the real estate division, it is targeting 20 per cent per annum in organic growth.

It is also on track to launch a $2 billion energy transition fund in the second half of 2024 which will be chaired by former prime minister Julia Gillard.