Oct 23 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%.
Commercial property isn’t a pure income asset class like cash or fixed interest but it has a few advantages over other forms of income-based investing, starting with the yield. Right now, the APN AREIT Fund, for example, offers a distribution yield of 6.08%, paid monthly.
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