When a property is purchased well (c.40% below replacement), well located, and significantly under-rented (c.40%), we think it’s worth a closer look.
I really love this regional shopping centre deal that we have seen recently. Whilst it does not explicitly meet the MP Funds Management high teens (plus) return mandate, my gut feeling (based on the property fundamentals) is that the deal will significantly outperform the stated 13-15% IRR and 8% annualised distribution in the Information Memorandum*. On that basis, I have made the decision to invest personally.
For me, the stated base case is attractive as the c.8% distribution provides a c.3% premium on bank rates, and the uplift on sale bringing the total base case forecast return to 13-15% is defensible based on the underlying property fundamentals*. As mentioned, the property fundamentals also provide a high probability in my view of outperformance to the stated 13-15% IRR base investment case.
Some of the property fundamentals that I feel underpin the defensibility and strength of the investment are:
Attractive acquisition metrics; 40% below replacement cost*
2nd most productive centre in Queensland and 9th Australia-wide*
Tenant productivity is 47% above the Urbis benchmark and Occupation cost is 33% below the Urbis benchmark which reflects the ability to materially improve rents*
Relative c.40% under rental on several tenancies, meaning the ability to reset rents to market and receive immediate value uplift.*
Strong regional economy: 4-5 million annual visits and the local region is one of the fastest growing in the state with a planned $4.2bn in capital investment into the region to support job growth, economic growth, and population growth.*
A high proportion (57% of income) of non-discretionary tenants such as Woolworths (3,500sqm), Kmart (6,260sqm), and Coles (3,415sqm), which all generate turnover rent due to high performance.*
There is an existing approval for a c.1000sqm medical precinct to be built at the centre, and a significant opportunity to optimise the tenancy mix to further capitalise on, and enhance the tenant profile, adding investment value.*
For this particular transaction some of the executive team of MP Funds Management is co-investing however, we are not pulling together our own MP Funds Management fund for this deal.
Our existing MP Funds Management investors and MP Report Premium members can however access and co-invest in the deal and receive a 15% pre-negotiated discount on the Manager's performance fees, via the MP Report Premium here.^
You can also contact me directly to discuss the opportunity or reserve an allocation via myp@mpgroupinternational.com
Mandi Prager
CEO, MP Funds Management
*View the complete Information Memorandum via the MP Report Premium. Sign-in here.
^MP Report Premium is available to Wholesale Investors only. Apply now.
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This communication is not intended to serve as investment advice or an investment recommendation. The content does not take into account your financial objectives, situation or needs. You should do your own research and, if appropriate, obtain independent advice from a suitably licensed professional before making investment decisions.
* Actual investment performance may differ materially from forecast returns.
** Please note that past performance is not a reliable indicator of future performance.
Disclaimer: Each of Golden Goose Capital Pty Ltd, (AR No:1301 947), MP Funds Management Pty Ltd currently (AR No:1301 946) and MP Report Australia Pty Ltd (AR No:1301 948) has been appointed as an authorised representative of Durant Wyot Funds Management Pty Ltd (ABN 41 655 164 864, AFSL No: 537318).