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MP Funds Management's co-investment into the acquisition of a 13-level CBD office tower

Value Hunting / Markets

Australia

Aug 21 2019

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In November 2014 we co-invested with another Manager into the acquisition of a 13-level B-grade office tower in North Sydney CBD for a purchase price of $36.75m or $4,665 per sqm. The gearing ratio was 65%, debt was locked in at a rate of c.4% for the intended five-year investment period. 

The asset was acquired as an outstandingly located institutional-grade core asset with a WALE of 3.35 years and passing yield of 10.07%. Value-add opportunity existed in the re-leasing of the asset as the old leases ran off, improving the leasing profile of the asset and on-selling the asset at a compressed capitalisation rate on the basis of minor cosmetic upgrades and improved leasing profile. 

Net rental distributions tracked in the vicinity of 8%, distributed quarterly, for the period. 

At the end of 2016 a residential developer made an offer to acquire the asset with the intention to hold for rental income and land-bank the building, with the view to undergo a future rezone and repurpose as a premium residential apartment development. 

The sale exchanged for a sales price of $70 million, or $8,889 per sqm, reflecting a sales capitalisation rate of 5.7%. Settlement of the sale was in April 2017 with repayment of our principal investment and an investment return reflective of a 42.8% IRR or 2.25 x money multiple, over the 29-month period.

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).

MP Funds Management 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. MP Funds Management will originate its own investments as well as co-invest with other Managers on a deal-by-deal basis, where that investment is in line with the MP Funds Management investment philosophies which include:

>>Defendable assets with strong equity and downside risk protection

>>Outstanding underlying property fundamentals

>>Strong Manager fee alignment with investor equity protection and performance

>>Represent an outstanding risk-adjusted return

>>Risk mispriced in favour of the investor 

Where MP Funds Management co-invests with another Manager, MP Funds Management Investors benefit from additional layers of diligence in both upfront initial due diligence, prior to making the investment as well as additional rigour in regular reporting diligence. 

 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.

 

·     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.

 

 

Disclaimer

The information on this website is for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial or investment adviser. No material contained within this website should be construed or relied upon as providing recommendations in relation to any legal or financial product. MP Report Australia, MP Funds Management, MP Group International, Golden Goose Capital (together MP Group or the Information Providers) do not purport to contain all the information that may be required to evaluate any potential transaction or investment. The Reader and its advisors should conduct their own independent review, investigations and analysis of any Opportunity mentioned and of the information contained, or referred to, in this document including the merits and risks involved. Information Providers have not had regard to the investment objectives, financial situation and particular needs of the Reader. The Reader should make its own investigation and assessment of the Investment, verify to its own satisfaction the accuracy, reliability and completeness of the information in this Information memorandum and obtain independent and specific advice from appropriate experts. The estimates and projections contained on this website involve significant elements of subjective judgment and analysis, which may or may not be correct. There are usually differences between forecast and actual results because events and actual circumstances frequently do not occur as forecast and these differences may be material. The Reader and its respective advisors should make their own independent review of the material assumptions, calculations and accounting policies upon which the accompanying estimates and projections are based. To the fullest extent permitted by law, the Information Providers disclaim and exclude all liability for any loss or damage suffered or incurred by any person as a result of: 1. Their reliance on the information contained in this information; 2. Any errors in or omissions from this information.

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