Project Ares

Project Ares involved a mezzanine loan to a Hong Kong listed developer, secured by a nearly completed prime mixed-use asset in Guangzhou, China. The project was exited successfully in 2017.

December 2015

Acquisition date

Guangzhou

Location

Mixed use

Sector

c.118,000 sqm

GFA

Transaction background

  • Prime location: The underlying property is located in Guangzhou’s prime CBD with a direct subway connection though its basement level.
  • Off-market deal: The borrower, a Hong Kong listed company, owned 51% of the property and was seeking acquisition financing to acquire the remaining 49% interest. The investment was sourced off-market through InfraRed NF’s extensive network.

Investment rationale

  • Good credit: The borrower’s controlling shareholder was a high profile HNW with controlling interests in a number of listed companies.
  • Low development risk: The loan collateral was a nearly completed development. The mixed-use property with a shopping mall, office floors and serviced apartments required only internal fit-out.
  • Outstanding risk-adjusted returns: The loan included a fixed interest component and an equity kicker linked to serviced apartment sales, while also benefiting from a robust security package including a personal guarantee from the borrower’s controlling shareholder, a board seat and various equity pledges.

 

Value-addition

  • Early repayment with full interest: The loan was repaid three months early at the borrower’s request, however interest was paid in full up to the original maturity date due to the structuring of a minimum loan term.