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Pacific Equity Partners forges into reverse mortgage sector
Pacific Equity Partners is targeting a slice of Australia’s burgeoning reverse mortgage market, with the Sydney-headquartered buyout fund snapping up a significant stake in the debt of unlisted retirement funding provider Household Capital.
Street Talk can reveal PEP’s Capital Solutions dealmakers have invested in the mezzanine debt portion of Household Capital’s wholesale funding facility, alongside superannuation funds house IFM Investors and senior financier Citi.
The deal with PEP’s expected to take the size of Household Capital’s funding capability to more than $600 million, and ramp up the expansion of its services to Australia’s Baby Boomers, who are wrestling with inadequate super balances because of cost-of-living pressures and increasing life expectancy.
A reverse mortgage allows borrowers from the age of 60 to convert the equity in their homes into cash. Equity is the value of the property, minus any mortgage debt.
Big banks have ceased offering the products and the entire mortgage market tightened lending standards after the Hayne royal commission.
‘‘Household Capital has pioneered innovative, scalable debt funding to meet the retirement funding and housing needs of an ageing population,’’ PEP managing director Jake Haines told Street Talk yesterday.
‘‘This funding will allow Household Capital to meet increasing demand from Australian homeowners to access the wealth in their homes and support adequate retirement funding, housing and care,’’ Household Capital chief executive Joshua Funder added.
PEP’s Capital Solutions strategy was launched in 2021, and makes credit investments in Australian and New Zealand businesses. It targets senior secured instruments that are protected with covenants and other rights, and where the dealmakers feel they can also help the portfolio company with its strategy.
The fund is run by Haines, who joined the firm’s buyout team more than 20 years ago, and a group of five operatives that will work alongside PEP’s wider team.
At the launch, the fund was expected to target businesses with $10 million to $40 million a year in earnings.
Haines oversaw the deal alongside PEP director Angus Larcombe.
PEP is Australia’s largest private equity firm with $8.8 billion in assets under management. In May, it locked in $1.4 billion for its second secure assets fund with help from the Clean Energy Finance Corporation.