The oversubscribed corporate note, arranged by FIIG Securities, comes as the firm has recently surpassed $1 billion in funds under management.
Boutique investment manager and non-bank lender Zagga has secured $65 million through a corporate note arranged by fixed income specialist, FIIG Securities.
With an initial target figure of $50 million, the four-year, senior secured note closed 30 per cent oversubscribed. It provides investors access to a fixed income investment with a current yield of ~7.85 per cent per annum or Bank Bill Swap Rate (BBSR) + 4.2 per cent.
Commenting on the raise, lead arranger FIIG’s head of capital markets and syndication, Daniel Jones, said investors were drawn to the bond’s structure, Zagga’s experienced management team, real asset backing and the transparency of the underlying portfolio.
“The oversubscription of this issuance evidences the strong investor appetite for disciplined commercial real estate credit investment,” Jones said.
He added that given current volatility, there is strong investor demand for Australian fixed income at present, while real estate provides physical security.
“As the sole lead arranger, FIIG originated and structured the deal, ensuring the offer met investor demand, while providing Zagga with flexible long-term capital that complements its other funding sources,” Jones said.
The two firms first partnered on a four-year, $30 million Senior Securitised Note issue in November 2021, with a further $13 million tap-issue in March 2022. The $43 million issuance matured in November.
Following the successful raise, the two parties decided to extend their partnership for this latest issuance.
The funds will be managed by Zagga and invested in mid-market residential development projects along Australia’s eastern seaboard, with a primary focus on Sydney, which the firm flagged as the country’s deepest and most liquid market.
Zagga co-founder and chief executive officer, Alan Greenstein noted that structural imbalances in the Australian property market present a compelling investment case.
“Australian real estate has enjoyed 20 years of sustained growth. A nationwide housing shortage, pullback from traditional lenders due to capital and regulatory constraints, and a booming population further strengthen the sector’s momentum,” Greenstein said.
He referenced Zagga’s project pipeline which includes the construction of boutique apartments in Mosman, a luxury residential development in Dee Why and early-stage funding for developments in Marrickville and Manly.
In the case of each project, strong demand and significant lack of supply is expected to act as a significant tailwind.
“In our view, there has never been a better time for experienced, specialist real estate private credit managers to access investment-grade transactions with strong sponsors and counterparties,” Greenstein added.
The raise also comes as Zagga recently surpassed $1 billion in funds under management (FUM), having experienced 50 per cent year-on-year growth. The boutique manager is targeting $5 billion in FUM by 2030.
Australia’s total private credit market is now valued at $224 billion, having grown 9 per cent year-on-year. Of that figure, commercial real estate lending makes up $92 billion.
Reflecting on the evolution of real estate private credit Zagga has seen over its eight years as a firm, Greenstein noted that the once alternative investment is transitioning into a “core part of a well-balanced portfolio.”
Since originating its first loan in 2017, Zagga has invested over $2.5 billion across more than 300 transactions in the Australian commercial real estate sector, returning more than $1.5 billion to its global investor base across more than 200 successful exits. It now invests on behalf of over 1,000 investment entities.
