Market dynamics and regulatory changes have seen the major Australian banks materially reduce their exposure to property financing, resulting in a void in the lending market. This void and the resulting lack of loan competition have led to an increase in returns from senior lending, while the risks are manageable due to the strong structural demand for property and low levels of loan leverage. The resulting dislocation has created some outstanding investment opportunities and Merricks Capital has been pursuing these senior lending opportunities through the Partners Fund.
The Partners Fund has provided funding for a range of senior property loans including land subdivision, construction financing and bridging finance.
The Merricks Capital senior lending investment team includes some of the most experienced property investors, developers and builders in Australia. With expertise across the entire investment spectrum – covering development and design, project management and delivery, construction, sales, banking and finance as well as legal and risk management – we have refined this combined experience and skill to create a superior investment process in the senior lending space.
The investment team considers a range of investment criteria, including the quality of the underlying project; investment metrics such as IRR (target of 10-15%), term to maturity (6-30 months) and conservative loan-to-valuation ratio (LVR); risk factors such as any defined exit strategy and adequate level of presale coverage; and measures of security including the level of equity invested, collateral security or personal guarantees from the sponsor.
Working with well-established loan originators and high-quality borrowers, the Partners Fund has established a high-quality loan book which is delivering exceptional risk-adjusted returns to investors. While the investment process is inherently robust in nature and structured around strict risk and performance standards, it is flexible enough to adapt to changing market conditions so that our investors can take advantage of new opportunities as they arise.
Merricks Capital co-invests in the Partners Fund alongside our Investors, ensuring a powerful alignment of interests for all parties.
All loans are approved by the Merricks Capital Investment Committee and Credit Committee and are aided by the Advisory Committee following rigorous due diligence and credit approval processes. The Advisory Committee sits externally and its membership includes:
Nick Brown – Founder and Managing Director at Icon Co (tier 1 construction company). 25+ years’ experience in the building and construction sector including residential, commercial, retail and industrial construction.
Danny Ciarma – Founder of Urban DC (property development company) 20+ years’ experience as a property developer. Commenced career as an architect, previously Managing Director and Partner at Pan Urban.
John Meagher – Founder and Managing Director Three Sixty Property Group (large project development sales agency). 25+ years’ experience previously with Becton, Australand and Colliers.
Michael Kerr – Associate of the Australian Institute of Quantity Surveyors. 50 years’ experience in the building industry. Joining Rider Levett Bucknall (RLB) in 1968 and a director of RLB for 25 years, together with being past Chairman of RLB Oceania and an RLB Global Board member