New mortgage income fund sees residential opportunities
The newly launched Lark Mortgage Income Fund is looking to capitalise on growing residential housing estates in south east Queensland, a trend underpinned by migration out of Victoria.
The fund was launched in partnership between Ark Asset Management and Lucerne, and aimed to generate returns from real property-based loans secured by first ranking registered mortgages.
The fund, which was launched in September, would target monthly interest in excess of 7% per annum, net of all fees and expenses, and would offer monthly redistributions, with the key investors being high net worth and ultra-high net worth individuals.
With an estimated value of Australia’s private commercial real estate debt sector sitting currently at $290 billion, the non-bank sector was expected to grow from current $15 to $16 billion range, accounting for 6% of the market, to around $40 billion over the next three to four years.
Ark Asset Management’s chief executive, Peri Macdonald said the reason the fund was launched was because it had a long-standing relationship with our investment partners.
“We saw that there was a growing appetite for investors to invest in a private debt in commercial real estate and at the same time the non-bank sector, or the private commercial real estate debt sector, was expected to continue to grow,” he said.
The growth in the non-bank lending sector was be driven by a number of key factors, including the capital constraints imposed by the Australian Prudential Regulation Authority (APRA) on the Australian banks, reducing the banks’ exposure to commercial real estate.
“At the same time when that is happening in the market, the non-bank lenders provide a genuine alternative to the banks even though the cost is higher. The reason why they see it as a genuine alternative is because of the more flexible conditions, a greater level of leverage and probably most importantly, its speed to market,” Macdonald said.
“If you look at the profile of the investors who are coming to the fund at the moment we’ve got quite a high proportion of self-managed super funds [SMSFs], we’ve got a number of family offices and high net worth and ultra-high net worth individuals invested in the fund. We don’t have any institutional investors at the moment but the fund is open to institutional investors as it grows.
“It does have a broader appeal because we are seeing private debt as investments which are becoming more popular, in particular in the current environment where you know there is a lot of talk about inflation becoming something that we need to be more conscious of.”
One of the fund’s initial investments is in a residential land subdivision in the western growth corridor in Brisbane.
“There is a population story in Victoria at the moment as we are seeing a negative population growth over the last 12 months. And it is markets like that in South East Queensland that have benefitted of that. We have identified that market in particular, which is actually one of the highest residential growth market in Australia at the moment and it’s a market we happy to invest in.”
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