The transaction, announced by 360 Capital, involves a senior loan facility secured against a Bathla development at 137 South Street, Marsden Park. A senior loan facility is the first mortgage debt on a commercial investment, ranking highest in repayment priority.
The Marsden Park project comprises 72 apartments and is nearing completion, according to two sources close to the construction. Half of the apartments have already been pre-sold under contracts worth $25.8 million (excluding GST), 360 Capital said.
La Trobe Financial disclosed in August it had $38.1 million in total loans to Bathla, comprising four residential loans and one development loan. Through this deal, La Trobe has sold its development loan, recovering all outstanding principal, interest and late-payment charges and significantly reducing its exposure to the collapsed developer, the ABC understands.
360 Capital's ASX-listed mortgage investment trust, the 360 Capital Mortgage REIT, already held $8.9 million in subordinated debt secured against the same development. The trust has invested a further $5.2 million in the deal, giving entities associated with 360 Capital control of both the first and second mortgages over the project. “The step was not taken lightly, but is very important to protect the value of the trust's subordinated position,” the company said.
Morningstar equity analyst Winky Tan said lenders holding first mortgages were in a much stronger position to recover their money, while mezzzabine lenders further down the repayment queue risked losing most, if not all, of their investment. “When you are able to finish the project, you can sell it as a finished product, which will have a much higher valuation than a half-finished project,” she said.