Portavilla Edition

In 2016 MP Funds Management provided mezzanine finance for 31 Murarrie Road, a townhouse development of circa 25 townhouses.

MP Funds Management had the opportunity to buy out a portion of the incumbent capital provider’s position at a 19% per annum investment return (compounding monthly).

From a first look at the deal to the finalisation of detailed due diligence, documentation and drawdown of our funds, was a prompt period of approximately 17 days. In addition to the attractive return, the prompt execution was as a result of the downside risk protections negotiated, as detailed below:

>>The MP Funds Management 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;

>> MP Funds Management had second-ranking mortgage security on the land and subject property development assets and unconditional personal and corporate guarantees from the borrower;

>> MP Funds Management had a mortgage on further development sites aside from the subject property;

>> MP Funds Management had a corporate guarantee for our principal and profit from the incumbent financier; and

>>The incumbent financier kept capital in the deal which was subordinated to our MP Funds Management capital.

Asset type: Development

Investment type: Second-ranking mortgage debt

Forecast return: 19% + annual IRR

Status: Complete