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An MP Funds Management financing case study: 2 x 25-unit townhouse developments in Brisbane

Value Hunting / Markets

Australia

Jul 10 2019

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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).

 

·     Want to invest with us? Register for Golden Goose Capital HERE

·     Subscribe to the MP Report HERE

·     Find out more about co-investing with MP Funds Management Here.

·     Visit MP Funds Management HERE.

 

 

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