A conversation with Rohan Barraclough at Ironstate Capital Partners

In this conversation, Co-CEO Mark Hurley sits down with Rohan Barraclough, Founding Director of Ironstate Capital Partners, to explore the vision behind launching a new fund, the state of play in Australian commercial real estate (CRE) private credit, and Ironstate’s plans for navigating the current market challenges and seizing future opportunities.

Can you share the vision and motivation behind starting Ironstate and the journey that led to its creation?

Ironstate’s vision is to be a transparent and trusted investment manager for family offices and sophisticated investors seeking exposure to Australian CRE private credit. The business has been established as a patient manager with no legacy investments and limited pressure to transact so that we can be highly selective and investor-focused. We will invest in every investment alongside our investors, which aligns our interests to only invest where we see compelling opportunities. We’ve also put in place an independent Investment Committee and an independent Advisory Board to add investment rigour, strengthen governance, and provide operational and strategic support.

Many of the highest quality managers in the market were established with the support of family offices, however, as the CRE private credit industry has matured, some of these managers have focused their attention on attracting institutional capital and creating investment products suited to wealth advisors. This has benefited the industry by developing a more sophisticated and liquid private credit market, however, we believe it has also created an opportunity for boutique managers to re-engage with family offices and high net worth investors that are looking for managers that treat them as partners and provide differentiated, direct investment opportunities.

Ironstate focuses exclusively on Australian commercial real estate private credit. What are your views on this asset class, and how will Ironstate be differentiated from competitors?

Australian CRE private credit is a large market with structural tailwinds that has gained greater acceptance with investors, however, our view is that cyclical risks are increasing and investors need to be very selective when allocating to the sector.

The maturing of the market has led to a proliferation of multi-asset open end funds, however, our product strategy is to provide investors with direct investment opportunities into specific transactions. Providing investment opportunities on a deal-by-deal basis provides investors with visibility on underlying investments, discretion into which investments they choose to allocate, and enforces a discipline on the manager to only make investments that are compelling on a standalone basis.

Building strong partnerships with high-quality property developers and real estate asset owners is a key aspect of Ironstate’s strategy. Could you elaborate on the process and criteria Ironstate uses to select and collaborate with its partners?

Ironstate’s team has existing relationships with experienced property developers and asset owners around Australia. We look to invest our capital alongside partners that have strong financial alignment and a track record of delivering high quality projects. Whilst we typically invest on a project by project basis, our preference is to partner with developers where we can develop long term relationships.

We aim to not only be a capital partner, but also to be a value-add partner that works collaboratively with our borrowers to work through challenges and improve outcomes. We also look to partner with other managers that can provide funding for different parts of the capital structure, enable us to provide larger facilities, or add project or location specific expertise.

Considering the current trends in the commercial real estate market, what do you see as the biggest challenges and opportunities for Ironstate as it establishes itself in the industry?

The CRE private credit market is competitive, however, we will not seek to gain market share by compressing margins or softening covenants. Most investments are likely to come from existing relationships, situations and structures that are less competitive, and from opportunities arising from market dislocation on which incumbents are not focused. Most managers focus exclusively on direct loan facilities, however, we are structured to also provide syndicated facilities, underwriting facilities, or secondary investments, which are well suited to an environment of tightening liquidity.

The market has faced various economic pressures recently. How does Ironstate plan to navigate these challenges and ensure it delivers value to its investors?

Unusually for a newly established manager, we have a relatively cautious view on our investment end-market. Our view is that market tailwinds have masked manager differentiation but that emerging market dislocation means manager selection is now critical and we expect to see material performance differentiation between managers over the coming period. If market dislocation plays out as we anticipate, our low cost structure, lack of legacy investments, and flexible mandate will position us well to capitalise on opportunities that may arise.

What is Ironstate’s mission and what are your long-term plans for growth and development in the Australian commercial real estate market?

Our mission is to deliver for investors by supporting commercial real estate investment that builds a stronger and more prosperous Australia. This includes building financial security for our investors, building strong businesses for our borrowers, building partnerships & people, and building Australia.

For Ironstate, building Australia is about becoming a meaningful contributor to the property industry that delivers our built environment, employs more people than any other sector, and is the largest direct contributor to GDP. From increasing much needed housing supply, to building engaging places for people to work and collaborate, to creating hospitality venues that bring our communities together, the property industry is critical to building a stronger and more prosperous Australia.