2024 Financial Year in Review

FY2024 Overview

The last financial year showed how polarised the investment real estate investment landscape has become, with the “higher for longer” economic environment delivering a mixed bag of returns to investors.

Traditional, ‘core’ commercial asset classes such as office, retail and industrial – the chief beneficiaries of the zero rates environment – saw their valuations and returns drop sharply, as purchasers “priced in” high vacancy rates and weaker demand persisting for the near future .

Conversely, the residential market saw land and dwelling valuations continue to rise across all major cities as escalating construction costs continued to limit supply, contributing to worsening affordability. Commercial assets with access to recession proof cash flows, such as aged care and hospitality, also fared well as investors pursued more defensive, yield focused strategies. 

Against this backdrop, RW Capital’s focus for FY2024 was on investment realisations, rather than deployment. This was due to the inevitable pressure of high official government interest rates on asset valuations, plus the opportunity to reprice loans at current market rates.  

We returned over $1 billion to our investors in FY2024 across 11 projects and the average realised gross IRR was 14.6% p.a. for senior credit facilities and 15.4% p.a. for junior credit facilities. We also invested close to $400 million in new investments, across our inaugural Credit Fund I, Credit Fund II, Industrial Real Estate Fund I and Pet Resorts Fund II. 

Key Highlights

Strategic Focus

Looking towards FY2025 we will likely see the cycle move into a new direction. Private credit will remain attractive, supported by continued major bank withdrawls, demand from the capital constrained housing development sector and a large wall of refinancings hitting the market, providing ample opportunity to originate loans at healthy margins. 

Core commercial real estate sectors will likely trough by the latter half of this calendar year, with private and opportunistic investors snapping up steeply discounted opportunities with strong cash on cash yields. Cuts to the RBA cash rate, widely forecast to occur in early to mid 2025, will provide additional supportive tailwinds and will likely result in rising domestic and offshore investor interest in Australian commercial and residential real estate.