The Merricks Capital Partners Fund (the Fund) returned 0.8%* in November and 10.1%* on an annualised basis since inception.
Global markets experienced a volatile month amid shifts in market positioning due to the US election. Reinflation risk arising from firm US CPI numbers and the US election result eased throughout the
month, allowing bond yields to finish the month lower (US 10y bond yield 4.19%, AU 10y bond yield 4.33%) (Bloomberg). Credit spreads were stable (-2bps hedging cost for the month) despite equity markets marking new highs, implying that the market remains cautious as equity yields continue to retract. In New Zealand, the RBNZ announced another 50bps rate cut, now 4.25%, providing a boost to
business confidence and asset transaction momentum.
During the month, the Fund received full repayment on a 2.3% allocation to an office development loan. The facility financed the construction of a nine-storey, ‘A Grade’ office building in South Yarra,
Melbourne. The facility was refinanced on completion of the project, underscoring the quality and execution of the sponsor. Two new loan settlements, one build-to-rent development project inner-city Melbourne representing a 3.5% allocation for the Fund, and the other having a 0.2% allocation, where the facility is secured against a multi-asset commercial site in Auckland’s Wynard Precinct.
The Melbourne Place Hotel, a development project financed by the Fund (4.8% allocation), officially opened in November. Located at 130 Russell Street in Melbourne’s CBD, the 14-story hotel comprises 191 rooms and features two dining venues. Multiple offers to buy the hotel have been received now that the hotel is open. One buyer is particularly advanced, and we are closely considering this offer versus running a full campaign in the new year, which may see a material upside to the Fund.
We are currently reviewing $1.2bn in new investment opportunities across residential development, mixed farming, horticulture, and specialised infrastructure. With capital availability still constrained
in Australia and New Zealand for acquisitions and developments, we view the risk-adjusted returns on senior debt as highly attractive in an uncertain macro environment.
