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Merricks Capital Partners Fund Portfolio and Market Update August 2023

St Kilda Road, Melbourne

The Merricks Capital Partners Fund (the Fund) returned 0.8%* in August and 10.2%* on an annualised basis since inception. The FY23 final distribution of 4.0% was paid during the month to bring the total FY23 income distribution to 8.0%.

Income for the Fund during the month was 84bps. The Fund’s credit insurance was flat by end of the month following credit markets gaining confidence after China announced further economic stimulus. Based on the forecast performance for the Fund’s 59 senior secured investments, the Fund is expected to deliver within its target range of RBA Cash +6% to 8% (prior to any credit insurance movements) for FY24.

One new loan was settled during the month, a 0.4% allocation for the Fund. The loan provided acquisition funding for a permitted development site in South Yarra, one of Melbourne’s blue-chip suburbs. The approved development is an 11-level mixed-use asset, 46% retail and 54% office, located on a ~900sqm site 100m from South Yarra station. Interest is fully serviced, and the loan is forecast to return 10.0%* for investors.

Two loans were repaid during the month. The first, a residual stock facility in Perth, WA, that comprised 168 apartments in a 212-lot development. The construction of the residential apartments was also financed by the Fund in 2019 and exemplifies our start-to-finish project delivery with a strong sponsor. The IRR of the loan was 12.1%*. The second loan, a 2.7% allocation for the Fund, was secured against a prime development site situated at the corner of St Kilda Road and Kings Way, Melbourne, and a suburban office building in Burwood, Melbourne. The St Kilda Road site was marketed for sale by the borrower and purchased as a build-to-sell apartment project by an institutional developer with its close proximity to Melbourne’s CBD, the Royal Botanic Gardens and new ANZAC train station making this an attractive residential asset. The IRR of the loan was 8.3%*.

In August, we continued due diligence on $750m of new loans across our sectors, including residual stock facilities, commercial mixed-use properties, horticulture, specialised industrial, and asset-backed natural resources. Agriculture continues to be the sector we’re seeing the strongest investment opportunities in, with over $200m of new loans in due diligence.

*These returns are stated net of fees and costs

 

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