The Merricks Capital Partners Fund (the Fund) returned 0.8%* in October and 10.1%* on an annualised basis since inception.
US election risk brought higher volatility to the bond and currency markets during October. The Fund’s macro credit hedging cost was flat for the month as credit spreads held up and the Fund added CDS protection opportunistically in anticipation of ongoing macro uncertainties. RBNZ cut interest rates by a further 50bps (to 4.75%) and NZ business confidence lifted to a fresh ten-year high (ANZ).
The Fund was repaid on two loans during the month. The first is an agricultural loan facility (0.7% allocation for the Fund), secured against a portfolio of grazing properties in New South Wales. The
borrower repaid the loan after transacting the largest property to an institutional equity buyer who conducted due diligence on the carbon and biodiversity income potential of the asset. The second loan
(0.8% allocation) was a facility financing the construction of a large-format retail centre in Seaford, 30km south of Adelaide. Demand for the product was strong, with five out of six tenancies pre-leased to national big-box tenants and a sale settlement of the asset occurring seven weeks ahead of the original schedule.
The Fund also exited a mature agricultural loan in New Zealand as part of providing funding to a purchasing party that was the highest bidder in an on-market process to acquire the business’ cherry orchards. The maturing loan delivered a 9.5% net IRR and the new borrower will continue the orchard development with a much stronger balance sheet and is forecast to deliver a 10.5% net IRR for the Fund.
One loan was extended, a land development facility secured against 108-hectare broad-acre development site adjacent to the Armstrong Creek residential growth area, 12km from the Geelong CBD. The extension will support the borrower as they progress through a planning scheme amendment and is return-accretive for the Fund with an expected net IRR of 10.0% and peak LVR of 37%.
We are currently assessing $1.2bn in new investment opportunities across residual stock, mixed-farming, horticulture and residential development with expected settlement of our first loan in the emerging Build-to-Rent (BTR) sector likely to occur in November.
