Qualitas Real Estate Income Fund (QRI.AX): Model Update

Research evidence excerpt

Qualitas Real Estate Income Fund (QRI.AX): Model Update

Qualitas Real Estate Income Fund (QRI.AX)

16 June 2026 Citi Research

Qualitas Real Estate Income Fund

Valuation

Our target price of $1.60 is derived using a blend of our Price-to-Book based NAV and DCF valuations.

We apply a one year forward adjusted price-to-book ratio to our NAV, excluding non-cash items. We see a 1.0x P/Book ratio as

prudent when compared to financial peers. Although this is higher than REIT peers, the equity buffer on impairment is a key

differentiator to our traditional cap rate real estate discount.

Our DCF factors in a discount rate of 10.03%, a beta of 0.87, a risk-free rate of 3.5%, and an equity risk premium of 7.5%.

Risks

We view QRI as being exposed to a range of risks. Key risks include the loss of loan principal if a borrower can’t repay the loan,

and the security property value declines and is insufficient to meet the full loan repayment, and the loss of loan income if the

cash flow from the property or other borrower sources is insufficient to pay the loan interest and fees due to the lender.

A major near-term risk is the earnings and asset value impact of higher interest rate costs and pressure on the underlying

borrrower and related collateral. A key risk relates to the potential for expanding cap rates and lower valuations on collateral

assets.

Financial risks are more limited due to limited use of gearing. Changes in interest will also affect the group’s interest income,

and could influence the short-term earnings impact of acquisitions.

Valuation risks include movements in the market’s assessment of appropriate cap rates on borrowers properties, and/or the

required return on the cash flow stream that the stock delivers to securityholders.