David Gribble

Leading Australian multi-strategy alternative investment manager Alceon has announced a strategic investment into INSITE DC, a rapidly growing Australian data centre developer and operator.

Alceon’s investment provides INSITE DC with capital to significantly accelerate the experienced data centre developer and operator’s development pipeline, expanding its land bank, and supporting the delivery of energy-efficient, high-availability data centres in target locations across Melbourne and Sydney.

The partnership will harness a differentiated advantage in developing and operating world class data centres across the Australasia region incorporating high-density power configurations, advanced cooling technologies, and resilient connectivity solutions. INSITE DC maintains a strong focus on sustainability and alignment with evolving environmental standards across the region.

Alceon’s data centre strategy is focused on two complementary value-creation pathways:

• Powered Land Sales: Identifying, zoning, and establishing powered-land sites to either feed the INSITE DC pipeline or sell to third-party data centre developers and operators, providing earlier, de-risked capital returns and portfolio diversification.
• Develop and Operate: Undertaking the full development and operation of data centres by INSITE DC for major hyperscale, cloud, and enterprise tenants. This pathway creates an ongoing development pipeline and growing platform value of INSITE DC, and is the strategy underpinning the strategy’s seed asset.

This dual-track approach gives Alceon and its investors primary exposure to data centre development and the growth of a major operating platform, while delivering selective near-term value realisation through powered land sales. Alceon anticipates this to be a scalable strategy as additional opportunities emerge and expects to raise a series of institutional capital vehicles to fund individual developments as tenant commitments are secured.

Alceon will leverage its deep expertise in land development and capital sourcing, together with power network experts from its affiliate company, Formus Property, a specialist property development, power and energy advisory firm, to deliver critical capability in identifying and securing powered land. Formus brings in-house power specialists with direct experience working alongside network authorities, deep knowledge of the grid connection process, and a broad network across data centre developers, hyperscalers, and operators.

David Gribble, Chief Executive Officer, Alceon said: “Digital infrastructure is one of the highest-conviction investment thematics globally, underpinned by structural demand for data, cloud services, and AI compute. INSITE DC represents a compelling opportunity to partner with an experienced and deeply credentialed platform, focused on delivering critical infrastructure in key Asia Pacific markets. Together with Formus, we have a differentiated ability to access strategic landholdings and unlock value through secured power, the defining constraint in this market. We are pleased to support Nauman, Anik, and the team in executing INSITE DC’s growth strategy across Australia and the broader region.”

INSITE DC founders Nauman Akhtar and Anik Akhter are highly experienced industry specialists with decades of experience developing and delivering hyperscale data centres across Australia. INSITE DC’s pipeline includes multiple campus-style developments in Melbourne and Sydney. Discussions are underway with future customers, including major hyperscale, cloud, Neo Cloud, and AI workload tenants seeking leading-edge compute solutions.

Nauman Akhtar and Anik Akhter, Co-Founders, INSITE DC said: “We are excited to partner with Alceon as we scale our platform to meet the next wave of demand driven by artificial intelligence and cloud technologies. Our focus is on delivering flexible, scalable, and energy-efficient data centre campuses that serve both hyperscale and enterprise customers at the highest standard. With Alceon’s backing, we are well positioned to accelerate our developments in Melbourne and Sydney and expand our presence across the JAPAC region.”

The DC Catalyst Fund represents the beginning of what Alceon expects to be a significant and growing platform in one of the most compelling infrastructure sectors of this decade. With a seed asset already underway, an active development pipeline across Melbourne and Sydney, and deep relationships across the hyperscale and enterprise tenant landscape, the partnership is immediately operational.

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The Fund primarily lends to Australian mid-market real estate companies, focusing on financing real estate assets, particularly in residential markets. A smaller portion of the Fund’s loans are allocated to industrial, retail and other real estate sectors. Additionally, up to 20% of the Fund’s capital may be invested in New Zealand assets.

The Fund’s strategy is conservatively positioned, holding exposure to only senior first mortgages at relatively low loan-to-valuation ratios (LVRs), and supported by some of Australia’s leading financial advisers, wealth firms and family offices.

Superior – High Investment Grade Rating

SQM Research, one of Australia’s foremost investment research houses, awarded the Fund a 4.25-star rating, indicating its “substantial potential to outperform over the medium-to-long term” and making it a strong candidate for inclusion on most approved product lists (APLs).

SQM Research says “The investment/lending process is thorough and robust. Significant due diligence on investments is undertaken, with independent property and construction industry experts engaged along the investment pipeline. A series of monitoring protocols are in place to mitigate default risk.”

SQM further states “The Fund is fully allocated to senior debt (first mortgages) and at relatively low/modest LVRs (maximum allowed is 65%), which means that the Fund is lower risk than some other Funds that have a lower allocation to senior debt & asset-backed debt and at relatively higher LVRs.”

Consistent Return – 8.66% (annualised since inception in October 2019)^[1]

Alceon Head of Funds Management, Grant Atchison said: “The Alceon Debt Income Fund has enjoyed strong growth, growing from $106 million in May 2023 to $193 million in May 2024.”^[2]

Since establishment in October 2019, the Fund has a net return of 8.66%^[3] a year with a 3-year return volatility of 0.38%.^[4] The Fund is diversified across 57 loan facilities, 43 separate borrowers with 100 percent of the portfolio invested in first mortgages/ senior debt and a current weighted average LVR of 62 percent.^[6]

Atchison added, “Alceon focuses on originating well-secured senior debt positions with conservative LVR’s enabling us to provide our borrowers and development partners with greater speed, flexibility, and certainty compared to traditional real estate lending sources. This approach also allows us to capitalise on current market dynamics and the reduced presence of traditional banks, ultimately delivering higher returns to our investors.”

Alceon’s total real estate private debt portfolio comprises approximately $2.8 billion managed across a series of open-ended funds, close-end syndicates and institutional SMAs. Since inception Alceon has originated $7.9 billion in senior real estate loans across 288 individual transactions in Australia and NZ.

———

Notes:
[1] Past performance is not a reliable indicator of future performance
[2] Ibid
[3] Ibid
[4] Ibid
[5] As at 30 June 2024

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Todd Pepper

Financier and multi-strategy alternative investment manager, Alceon, and its long-term partner CPRAM, a boutique property investment and advisory firm specialising in retail and mixed-use properties, have acquired the Smithfield Shopping Centre in the Cairns’ northern growth corridor in Far North Queensland for $138 million.

The strategic investment in a high-yielding regional retail asset in the rapidly-growing northern corridor of the Cairns CBD has been settled with the purchase price reflecting a per square metre rate of less than $4000 psm..

Smithfield Shopping Centre—comprising a gross lettable area of 34,786 sq m—is the third largest retail centre in Cairns and one of the best performing. Built in 1986, it was refurbished significantly in 2017-18.

The centre sits on a 12.4- hectare site on a high-exposure corner at the junction of the Captain Cook and Kennedy highways at Smithfield—14 kilometres north-west of the Cairns CBD – and has an existing development approval to add another 4400 sqm.

It has four anchor tenants— supermarket giants Coles and Woolworths as well as Kmart and Event Cinemas—eight mini-majors and more than 90 specialty shops with parking for 1500 vehicles.

Alceon Queensland executive director Todd Pepper said: “Cairns is an attractive investment proposition for Alceon and CPRAM, with the city experiencing a peak in gross regional product at $10.3 billion and its lowest unemployment rate on record of about four per cent”.

“In particular, the northern corridor, which is home to James Cook University, is enjoying a growth spurt with more than 2600 houses being added to its catchment area, which is forecast to have 1.8 per cent a year population growth rate in the Primary Trade Area up to 2026.”

CPRAM Managing Director Olivier Sicouri said “We are delighted to partner again with Alceon Queensland on the Smithfield Shopping Centre. This asset comes with an attractive weighted average lease expiry (WALE) of about five years (for both income and area) and presents an opportunity through active management to substantially increase its income, which we expect will make it an attractive investment in terms of tax-effective income and capital growth.”

Pepper added that regional retail assets typically offered higher returns than capital city centres but rarely were they institutional grade assets in growth corridors with development potential such as the Smithfield Shopping Centre.

“A bonus for Alceon, CPRAM and its investors is the centre’s value-add potential and history as a institutionally managed asset for more than 23 years, which are regularly renovated to stay in line with higher standards and regulations.”

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Grant Atchison

Alceon, a financier and multi-strategy alternative investment manager, has received a sought after 4.00-star rating from SQM Research for its retail private debt fund, the Alceon Debt Income Fund.

The fund holds a portfolio of loans primarily secured by registered first ranking mortgages held over Australian property, mostly on the east coast of Australia. The loans finance a mix of real estate development, construction and ownership. The fund only invests in secured senior and second ranking loans with a maximum loan-to-valuation ratio (LVR) of 65 per cent.

Alceon Group is a leading non-bank financier with a loan portfolio of $2 billion at 30 June 2022. The Alceon Debt Income Fund which doubled in size over FY22 co-invests alongside Alceon’s High-Net-Worth, family office and institutional clients in the underlying loan portfolio.

Alceon launched the fund to allow advisers with retail clients to diversify their credit exposure with a conservatively positioned portfolio of private debt secured by real estate that paid monthly distributions and could be accessed via retail platforms.

The fund seeks to generate attractive yields of 5% – 7% p.a. and has generated and net return of 8.18% p.a. since inception to 31 July 2022.

Grant Atchison, Head of Real Estate Funds Management at Alceon said: “The Alceon Debt Income Fund differentiates from others in the segment by offering an institutional grade fund with a core focus on short duration, secured real estate debt.”

SQM Research notes: “The Alceon Group has more than a 10-year track record in the Real Estate/Investments industry and has about $4.3 billion in FUM and about 65 staff members. The Firm has a well-resourced and highly experienced investment team.”

“The investment/lending process is thorough and robust. Significant due diligence on investments is undertaken, with independent property and construction industry experts engaged along the investment pipeline. A series of monitoring protocols are in place to mitigate default risk.”

Atchison added: “Alceon and market commentators estimate that non-bank lending in the Australian residential real estate and construction market is between $20 billion and $50 billion. The fund allows advisers to access this growing institutional asset class that benefits investor portfolios with regular distributions and downside protection during volatile periods” .

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SQM says the commercial banks have reduced their exposure to real estate development and commercial real estate in recent years, providing opportunities for more nimble players at attractive risk-adjusted returns.

The Alceon Debt Income Fund holds a portfolio of loans primarily secured by registered first ranking mortgages held over Australian property, mostly on the east coast of Australia. The loans finance a mix of real estate development, construction and ownership. The fund only invests in secured senior and second ranking loans with a maximum loan-to-valuation ratio (LVR) of 65 per cent.

Alceon Group Director and Head of Wholesale Capital, Omar Khan, says: “We believe wealth groups are seeking to diversify their credit exposure with a move away from syndicates to open ended funds that provide diversification, regular income and reduce the administration burden of managing clients across numerous syndicates across multiples managers or asset classes.

In awarding its rating, SQM notes that “Alceon Group has close to a 10-year track-record” in real estate debt and “has a well-resourced and highly experienced investment team.”

SQM further notes, the firm’s “investment/lending process is thorough and robust. Significant due diligence on investments is undertaken, with independent property and construction experts engaged along the investment pipeline.”

Features of the fund include monthly distributions, a conservative weighted average LVR and short weighted average duration.

SQM says another strength is that Alceon co-invests in all of its funds, aligning the firm’s interests with those of its clients.

The fund’s objective is to provide investors with a total return of between 5% and 7% a year, after fees. Over the 12 months to June 2021, the fund returned 8.37% and has produced an annualised return of 8.5 per cent since inception in October 2019.

Alceon is a financier and multi-strategy alternative investment manager established in 2010, with funds under management of almost $3 billion across asset classes including real estate, private equity and listed equities. It has more than 47 investment and operations professionals.

Since 2011, no Alceon real estate debt investment has lost interest or capital.

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Grant Atchison

It’s a challenging time for investors seeking regular income streams with some capital stability, given the combination of interest rates pushed down further, and the earnings outlook on some companies still unclear.

“In search for alternative solutions, institutional investors and family offices have been increasing their capital allocation to secured private debt, but so far wealth advisory groups have had limited access to this sector,” notes Omar Khan, Alceon Group Director and Head of Wholesale Capital.

“To fill this gap, we are very pleased to launch the Alceon Debt Income Fund, a retail fund that aims to deliver regular monthly income from a diversified and conservative portfolio of debt secured by real estate.

“With the backing of Alceon’s extensive resources, we will seek to maintain a strong total return target of 5 – 7% a year.

“The portfolio of underlying loans in the Fund is primarily secured by registered first ranking mortgages held over Australian property, mostly on the east coast of Australia. The loans finance a mix of real estate development, construction and ownership.”

The fund features attractive risk adjusted returns combined with a conservative weighted average LVR and short weighted average duration.

“We believe it’s a compelling offer which provides investors and advisors a unique mix of features,” Mr Khan said.

“We follow a bottom-up process, conducting fundamental analysis and due diligence on potential opportunities with an active program to monitor the progress of projects, assets and delivery partners. The Fund invests in secured senior and second ranking loans where the loan-to-valuation ratio does not exceed 65%.”

The Fund, previously called the Freehold Debt Income Fund, returned 8.3 per cent (net of fees) over the 12 months to 30 June 2021 and has produced an annualised return of 8.5 per cent since inception in October 2019.

Mr Khan adds: “Since 2016, when APRA introduced lending controls, non-bank market share in Australia has increased from 4% to circa 8% – still well below global standards where non-banks command a 20% – 30% market share.”

“The growth, which continues today, can be attributed to a simple supply-demand equation where banks continue to reduce exposure to residential development lending. The reduced exposure is primarily driven by banks increasing the conditions that developers need to meet to obtain finance. The exhaustive and slow bank process can result in delays for developers, and hence they increasingly seek alternatives.”

The Fund invests in loans issued by mid-market real estate owners and developers to finance real estate assets in Australia and some limited exposure to New Zealand.

Grant Atchison, Executive Director – Head of Real Estate Funds Management, adds: “The investment team acts as a partner, not just a financier, with long standing capabilities from developer to senior debt financier. Alignment with investors is important and Alceon co-invests in every investment, having a significant stake in each investment.”

The fund is now available on Netwealth and HUB24 with plans to provide broad platform access to wealth groups across Australia.

The minimum investment is $10,000.

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