Mezzanine funder joins major banks on ‘de-risked’ Southbank deal

A real estate investment management firm will provide a $33.5 million mezzanine loan to BPM Group for its ambitious $300 million Shadow Play development in Melbourne’s Southbank.

In one of Qualitas’ largest mezzanine deals to date, the group will provide funding alongside Westpac and Bankwest for the luxurious 46-level, 486-apartment complex, which will also feature ground level commercial/retail space, and a Podium rooftop and pool.

Tim Johansen, managing director of real estate finance at Qualitas, said the development was attractive to Qualitas as it has been “significantly de-risked”.

“BPM has invested heavily in the design and marketing of Shadow Play to ensure that it’s a sought-after, premium offering that stands out in the market. As a result, it has already secured an impressive 75% of the project in pre-sales. BPM has also partnered with a quality contractor, the ICON Group, which has a strong track record in these types of projects,” he said.

Mr Johansen said BPM goes “beyond simply designing and building towers”, explaining that the company is a marketing-led organisation that understands “how to build a lifestyle brand”.

“This is apparent in its successful sales campaign for Shadow Play, which has seen a high level of pre-sales in a competitive local market.”

BPM founder and managing director Jonathan Hallinan said Shadow Play is BPM’s most significant project to date, requiring a trusted team of project partners across design, construction and finance. Mr Hallinan said BPM’s relationship with Qualitas to fund the development is “another positive advancement in the project’s delivery, which is on track for completion in the first quarter of 2018.”

The mezzanine loan will sit across Qualitas’ Debt Fund and its Opportunity Fund, which recently marked its second close after launching late last year. Mr Johansen said that finding quality assets for these funds was an ongoing focus for his team.

“Qualitas’ deal pipeline is experiencing good momentum. The current market dynamics, where banks are rationing credit, means demand for alternative funding is high. However, our robust screening process means we are very selective, and the transactions we undertake need a compelling investment case,” he said.

“We remain focused on funding quality developments that stand out from the crowd for their fundamentals, including location, design, level of risk and the track record of the developer. This approach means we can continue to deliver strong returns to the private and institutional investors in our funds.”

[Related: Notorious property developer loses appeal]

 

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