MERRICKS CAPITAL GETS A PLACE ON THE RIVER WITH $190M LOAN.
Liberman-family backed investment house Merricks Capital has stumped up a $190 million first mortgage loan to back the development of a major housing project overlooking the Yarra River in inner-city Melbourne. The Merricks move comes as non-bank lenders snare a greater slice of the commercial property book following moves by the major banks’ to scale back their $300 billion exposure in commercial real estate lending.
The Park House, as the project is known, is a mixed-use residential and retail development in Abbotsford and a joint venture between Salta Properties and the Smorgon family. The Park House, a $320 million project, is a joint venture between Salta Properties and the Smorgon Family. FloodSlicer The $320 million development, at 627 Victoria Street, will comprise 530 residential units along with retail space. It has been substantially pre-sold to a mix of local and offshore buyers
Non-bank lenders such as Merricks are typically able to lend when at least 70 per cent of their debt is covered by pre-sales in a development. That used to be the threshold for banks, but the big four have moved the benchmark to around 110 per cent in debt coverage required. “Often we’re asked the question ‘When will the banks come back?’ Our view is the banks are going back to a healthier place where they are not the sole provider,” Merricks chief executive Adrian Redlich said.
“The one thing we don’t want in this country is for credit to seize up if the four banks have an issue. We want diversification.”
Merricks Capital’s multi-asset investment offering has raised more than $3 billion in capital across property lending, commodities, equities, structured credit, hard assets, agriculture and infrastructure. Over the past 12 months, the firm has provided funding for more than 30 residential, land, commercial, hotel and agriculture projects with a combined value of more than $1.2 billion. Merricks is diversifying its deal flow, partnering with Australian Unity for a $500 million portfolio on senior property loans including land subdivision, construction financing and bridging finance. In one major deal late last year, Merricks backed Chinese private equity group Shanghai United for a $420 million mixed-use apartment and hotel development on Sydney’s Castlereagh Street. Merricks’ fund has been achieving returns of around 12 per cent for its investors.
But the Melbourne-based fund manager is not alone in the non-bank lending space, with players such as Qualitas, Wingate and MaxCap also active. Melbourne businessman Joseph Gersh, launched a $500 million real estate development finance fund last year. The rush has seen some private lenders slash interest rates but that more apparent at the smaller end of the market, according to Mr Redlich. “In major construction loans where you need to finance $200 million there are not many that can compete in that space. We are seeing less competition at the very big end.”