White & Partners Debt Management (WPDM) has closed its first fund, a 10-month first mortgage construction loan for Blue Sky’s Duke Apartment Project in the inner-Brisbane suburb of Kangaroo Point. The total investment was approximately $37m and is expected to deliver investors a net IRR in excess of 14%.
The project involves the development of a 15 storey, 125 apartment tower complex. The site is across the road from the Gabba cricket and AFL ground and features a rooftop pool and terrace overlooking the stadium. The development is close to the CBD and is well serviced by the retail and restaurant precinct at the Stanley Street end of the Gabba.
The investment highlights the difficulty facing developers securing debt funding for high quality projects:
The main impediment to securing bank funding was that pre-sales cover was less than 100%. White & Partners Debt Management has mitigated this risk by requiring 100% loan cover by July 2017 and adopting a conservative loan to value ratio.
White & Partners Debt Management is currently reviewing a strong pipeline of similar investment opportunities as a result of the continued withdrawal of the major banks from the development funding space.