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Merricks Capital Partners Fund Portfolio and Market Update September 2022

The Merricks Capital Partners Fund returned 0.8% in September and 10.4% on an annualised basis since inception.

As central banks focus on taming inflation with interest rate hikes, our capital deployment is across target sub-sectors that are underpinned by supply and demand fundamentals that are resilient to higher inflation markets. Over the past three months, 78% of new loans (by value) in the Merricks Capital Partners Fund were provided to businesses with hard assets that generate income. These investments benefit from the ability to pass on cost inflation in the short to medium-term.

Over the next quarter we have a strong pipeline of premium land and development opportunities where we continue to see good risk versus reward. We are currently executing our new loans in this sub-sector with additional risk mitigation through higher borrower equity contributions, additional loan covenants ensuring project contingencies and predefined loan exit strategies.

In September, the Merricks Capital Partners Fund settled three new investments, including a $29.7m horticultural business loan located in New Zealand, with a forecast IRR of 14.0% (net of fees and costs). Other investments include a $18.6m residual stock facility on a Sydney CBD apartment block with a forecast IRR of 11.1% (net of fees and costs) and a $27.8m hotel financing facility for a recently opened premium boutique hotel on Castlereagh St, Sydney with a forecast IRR of 11.5% (net of fees and costs).

The Merricks Capital Partners Fund also settled two new tranches on existing investments, a $6.1m commercial office loan in Parramatta, NSW and a $2.5m horticulture investment in the Sunraysia region of NSW. Additional security was obtained on each of these new tranches resulting in an average weighted LVR of 60%.

Due diligence has progressed on four commercial real estate loans and four agricultural opportunities, five of which are expected to settle in October representing an average weighted IRR of 11.2% (forecast, net of fees) at 64% LVR.

 

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