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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MP Funds Management has provided investment funding for approximately $1.3b in unlisted real estate since 2013 and has provided an investment return of approximately 21% annually. Whilst MP Funds Management focuses on unlisted real estate, I am always fascinated by innovation and I personally will sometimes invest in other areas. Recently I caught up with the founder of a very clever new Australian – based app called Stake https://stake.com.auwhich is a Business-to-Consumer based platform that enables Aussies to get direct exposure to the USA equities market.
United States of America
In November 2014 we co-invested with another Manager into the acquisition of a 13-level North Sydney CBD office tower for a purchase price of $36.75m or $4,665 per sqm. A total of $19.5m equity was invested with a gearing ratio of 65%, debt was locked in at a rate of c.4% for the intended five-year investment period.
MPFM has a key focus on real estate-based investment opportunities specifically along the eastern seaboard of Australia with strong underlying property fundamentals and target investment returns of between 15-40% on a risk-adjusted basis.
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