Liberman family-backed non-bank lender Monark Property Partners has kicked off a $50 million capital raising to fund developers with apartment projects in Melbourne’s undersupplied inner and middle rings.
Market conditions are still challenging, say Monark's Adam Slade-Jacobson and Michael Kark.
Monark’s fourth debt investment fund is its second raising this year, and will lift its total funds under management to over $250 million.
It’s one of a number of alternative funders, backed by a pool of wealthy private investors, that have filled the void created by a pullback in lending by the major banks.
While there has been some evidence of rising off-the-plan sales rates as first home buyers return, Monark executive director Adam Slade-Jacobson said the Melbourne apartment market remains challenging.
“There’s been a marginal improvement. But there are still concerns about construction and cladding along with a credit squeeze on developers,” he told The Australian Financial Review.
Monark has already identified three apartment projects in middle-ring suburbs such as Malvern and Brighton as seed assets for the new fund.
These projects are in suburbs that have been relatively undersupplied with new dwellings relative to population growth, and where demand from owner-occupiers is strong.
“We don’t do high-rise towers. Our biggest project was 140 apartments at Wyndham Harbour,” said Monark CEO Michael Kark.
Monark has done more than 80 transactions in over seven years, with the Boris Liberman family office, Jagen, backing all its funds.
Another prominent non-bank lender, CVS Lane Capital Partners, is backed by the Josh Liberman Investment Group.
Mr Slade-Jacobson said that even if major banks loosen their purse strings to developers, the non-bank sector would continue to grow.
“If the current cycle changes, private credit will just move up the risk curve to sit between equity and senior debt,” he said.
“Non-banks are entrepreneurial in their thinking and strategic in their deployment of capital.”
The latest mortgage fund will provide senior debt to developers so they can commence construction on lower pre-sales.
Monark will lend up to 65 per cent of the project’s valuation and 80 per cent of the cost.
It does require pre-sales, but will look at projects with as little as 30 per cent of the stock pre-sold and with end values of between $25 million and $75 million.
“Banks are active in the space but still want 100 per cent debt cover [from pre-sales],” Mr Slade-Jacobson said.
He added that funding development through a non-bank was only marginally more expensive than going through a bank.
“On average, it’s about 200 to 300 basis points higher,” he said.
Mr Kark said commercial real estate debt had become a genuine asset class to institutional investors.
“Our mortgage funds offer strong risk-adjusted returns with low volatility and with risk mitigation being absolutely paramount.
He said the financier had a track record of delivering targeted returns with no capital losses.