Melbourne Case Study

Montrose Securities arranged a second mortgage facility for $450,000 to 82% of valuation over a serviced offices complex in Little Collins Street in the Central Business District of Melbourne, Australia. The security consisted of 37 of 110 strata titled “own your own” offices in the building. The security also included a debenture charge over the borrowing companies, the company directors’ guarantees, and a deed of priority with the first mortgagee.

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The first mortgage was from an Australian bank at approximately 6% per annum with a small principal reduction component.

The loan was for 18 months on a principal and interest repayment basis at an interest rate of 25% per annum. The weighted average interest rate was 7.2% per annum.

Rental income to service the loan was from the 37 diversified tenants in the offices which were 96%-100% occupied and from fees for managing the building. Repayments were in equal monthly principal and interest installments. Over the course of the loan, the loan-to-valuation ratio steadily decreased.

Repayments were made in a timely fashion by the borrower and in turn at 20% per annum to the lenders who co-invested with Montrose.

“Montrose’s knowledge of the property market, its due diligence, loan structuring skills and risk mitigation provided us total confidence to co-invest in the Little Collins Street Melbourne Mezzanine Syndicate.”
Leslie Fogelgarn, Company Director and Lecturer in Business Studies at Swinburne University

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