MEZZANINE FUNDING - RESIDENTIAL ACCOMMODATION
CapitalGroup provided a mezzanine loan to assist with the development of a purpose built residential accommodation facility located close to Middlemore Hospital in South Auckland. The completed development was to comprise 32 fully furnished studio apartments in four blocks, with each block also housing communal lounge, kitchen and laundry facilities.
CapitalGroup invested funds for the following reasons:
- The developer had researched the prevailing rental market extensively and our view was that there would be strong demand for the apartments on completion.
- Necessary consents were held and a fixed price construction contract was in place with an appropriate builder.
- The development showed an attractive margin and our security position on completion was considered acceptable.
- Although the developer intended to hold the property as an investment following completion, each block of eight apartments would be on a separate title and could be sold individually in need.
The CapitalGroup loan was fully repaid from refinancing within two months of completion.