Liquidity Mechanism and Capital Raise Position 360 Capital Mortgage REIT for Growth

Strong Yield and Distribution Growth

360 Capital Mortgage REIT (ASX:TCF) has delivered a compelling HY25 update, underscoring its position as one of the highest-yielding mortgage REITs on the ASX. The trust forecasts a FY25 distribution yield of 10.2%, supported by a 118% increase in distributions since 360 Capital assumed management in September 2020. This consistent income growth reflects the trust’s strategic focus on private credit investments secured against Australian real estate.

The distributions are paid monthly, providing investors with reliable cash flow, and the forecast FY25 distribution per unit (DPU) is 60 cents, up 33.3% from FY24. This yield notably outperforms many peers, positioning TCF as an attractive income vehicle in a rising interest rate environment.

Capital Raising and Portfolio Expansion

In December 2024, TCF successfully completed a placement and conditional placement raising $8.9 million. This capital injection increased the trust’s gross assets by 35.9% to $33.8 million and expanded the loan portfolio to 55 individual mortgages. The portfolio remains conservatively structured, with 95.9% senior loans providing a significant first-loss buffer and strong capital protection. The weighted average loan-to-value ratio (LVR) stands at a prudent 68.9%, and the weighted average interest rate on loans is 11.6%, reflecting the benefits of higher prevailing rates.

The capital raising also enhanced market liquidity, with a 110% increase in average daily turnover and 79 new investors joining the register. The trust’s market capitalisation rose by 36.1% post-raising, reinforcing its growing relevance in the mortgage REIT sector.

Capital Protection and Risk Management

360 Capital emphasizes capital preservation as a core pillar of its value proposition. The trust’s loan book is predominantly senior secured mortgages, and the underlying real estate would need to experience a value decline of more than 30% before investor capital is at risk. This conservative approach has been validated by 360 Capital’s eight-year lending track record, which boasts no capital losses or impairments across $400 million in private credit transactions.

Additionally, the trust benefits from rate floors on senior loans, mitigating downside risk in a falling interest rate environment. This structural feature, combined with the trust’s focus on Australian real estate, eliminates foreign exchange and derivative exposures, further reducing volatility for investors.

Liquidity Mechanism and Management Agreement

In December 2024, unitholders approved a new off-market liquidity mechanism allowing buybacks at net asset value (NAV) plus accrued distributions, capped at 5% every six months. This initiative aims to improve trading liquidity and narrow the discount to NAV, which currently stands at a modest 1.0%. The trust also secured a 10-year investment management agreement with 360 Capital Mortgage REIT IM Pty Limited, ensuring continuity of management without introducing new fees.

Outlook and Strategic Focus

Looking ahead, 360 Capital Mortgage REIT targets a $100 million market capitalisation within the next 12 months, supported by potential entitlement and general offers aligned with NAV. The trust plans to diversify its loan portfolio further, increasing the number of loans to between 5 and 15, with a broader geographic and asset class spread. Co-investment opportunities with the unlisted 360 Capital Private Credit Fund and deal-by-deal syndication are expected to enhance portfolio depth and resilience.

The trust’s distribution policy aims to deliver returns of the RBA cash rate plus 4.0% net of fees, maintaining its appeal as a high-yield, capital-protected investment in the Australian mortgage credit space.