Oct 12 2018Add to Favorites
In an ongoing low-interest rate environment on savings and with banks withdrawing from property and construction financing, investment groups like Centennial Property Group are seeing value in providing first mortgage funding for property development, recently settling a $48m loan for a mixed-use retail/residential development in Sans Souci, NSW
The $48m loan was syndicated across Centennial Property Group’s sophisticated investor base
“We believe there are compelling opportunities to provide secured debt funding to the commercial sector with the potential to achieve risk-adjusted returns to investor portfolios”, says Kim Kitchen, Director – Marketing & Distribution.
“The strong investor interest is as a result of the withdrawal of first-tier banks from the commercial lending landscape over recent years”.
“CPG is targeting an Investor annual rate of return in the double digits and an approximate 1.1x multiple net of fees over a 21-month term”.
With the project located on Rocky Point Road, Sans Souci, the loan was provided by CPG to construct a five-story mixed-use retail/residential development accommodating 95 residential apartments above 472sqm of retail space with basement parking for a minimum of 167 vehicles.
The first mortgage loan terms provided by CPG reflected a Loan to Total Development Cost ratio of 78% and an ‘On Completion” Loan to Value Ratio of 66%. The funding was supported by minimum presales to debt covenant of 75%.
CPG’s commercial lending division is headed by Mark Zukerman, who joined the Group in November 2017 after having worked for Australian Unity in their Commercial Mortgage Trust business for more than 10 years. Mark has worked in the commercial lending and corporate banking sectors in Australia and overseas for the past 26 years.
“The developer has a compelling track record in property development in Sydney and the suburb of Sans Souci is one that we are particularly comfortable with based on the strong local owner-occupier buyer profile”, says Zukerman.
Centennial Property Group has completed more than $1 billion of transactions and produced an average internal rate of return across the portfolio of over 25%.
Home loan approvals have fallen significantly off the back of the APRA and the Royal Commission initiatives together with new Responsible Lending Criteria. The ABS recently reported that home loan approvals have fallen by 13.6% year on year and within that, investment loans have come back by c.20%
Off the back of successfully settling a $48m syndicated first mortgage for a residential apartment development in Sans Souci just weeks ago, Sydney-based real estate investment manager Centennial Property Group (CPG) opened a new fund with a focus on the industrial and logistics market, Centennial Industrial and Logistics Fund II (CIL II). The fund, available only to wholesale and private high net worth investors, opened on 1 November and was seeking to raise c. $38 million. CPG closed the fund less than two weeks later, well before the official close date, due to oversubscription.
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