Jul 10 2019Add to Favorites
In 2016 we provided mezzanine finance for two separate town house developments of c. 24 townhouses each, so around 50 townhouses in total in Brisbane. MP Funds Management came into the deal for a short period of six months. We had the opportunity to buy out a portion of the existing capital providers position at a 19% (investment return (which was compounding monthly).
From first look at the deal to finalisation of detailed due diligence, documentation and drawdown of our funds, was a prompt period of approximately 17 days. Aside from the attractive return, the reason we moved so quickly on the deal was as a result of the downside risk protections we were able to negotiate;
>>Our principal and interest or profit position were both covered by unconditional domestic presales exclusive of GST and with 10% deposits;
>>The townhouse build was significantly less complicated than a multi-level apartment project and the basement had been excavated to the lowest level, meaning there was 100% visibility on the site being clean, uncontaminated and with no unforeseen other excavation complication;
>> The fixed price design and construct contract had been locked in with a local builder who had a strong balance sheet;
>>The senior financing package was cost-effective and with a major bank, which had been documented and drawn;
>>The feasibility had sufficient margin to cover financing costs if there were significant delays in construction;
>> We had a second ranking mortgage security on the land and subject property development assets and unconditional personal and corporate guarantees from the borrower;
>> We had a mortgage on further development sites aside from the subject property
>> We had a corporate guarantee for our principal and return from the incumbent financier
>>The incumbant financier kept capital in the deal which was subordinated to our MP Funds Management capital
The project finished on time and on budget with minimal variations, sales settlements of the townhouses happened promptly on the occupation certificate being issued and our principal and return were paid to us without any complication.
MP Funds Management is working on a range of high-quality deals for co-investment and institutional debt arrangement in the hotel sector, retail shopping centre sector, commercial office sector, development sector and acquisition of bulk residual brand new residential apartment product (at a discount). Our key focus is the eastern seaboard of Australia.
MP Funds Management fee structure is largely performance-based and aligned with investors receiving their principal investment and base return in the first instance, with our fees being largely performance-driven.
Mandi Prager is the principal of MP Funds Management. MP Funds Management has provided investment funding for over $1.1bn of real estate-based investments across 22 transactions and produced an average annualised investment return of 21-22% (IRR).
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In 2014 we co-invested with former Managing Director and board member Steve Day, in the headstock of real estate investment management business, Propertylink. Investing in and managing major industrial warehouse portfolios, office tower portfolios, and infrastructure projects, other Propertylink co-investors included Goldman Sachs and London’s Duke of Westminster.
I am fascinated by the intergenerational transfer of wealth and how the financial and investment sector will evolve as a result. According to a study by Wealth X, over the next decade or so, one of the largest ever intergenerational wealth transfers will take place. Including all individuals with a net worth of $5million or more, its expected $15.4trillion of wealth to be transferred by 2030 globally. This sum is equivalent to the entire Chinese economy or 17 times the market capitalization of Amazon, one of the world’s most valuable companies.
Our first property financing deal was a c 150 apartment project, called VIDA, located at the riverfront in Brisbane’s Westend by Pointcorp, with a gross completed value of $100m approx. Bank West provided the first ranking senior debt, and we sat pari-pasu with Maxcap as a mezzanine loan, ranking in priority behind the bank with a second mortgage security and with Thakral Capital Australia subordinated to us as equity. After we had run a lengthy and detailed due diligence process, our capital was called in about the third quarter of 2013 and repaid in full by the end of November 2016, with a 21% IRR (-annual internal rate of return).
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