For each project Mosaic seeks to identify and facilitate the most appropriate capital structure based on a number of variables. Today there are many alternatives to traditional development financing and it is vital that the most efficient structure available is utilised to maximise project efficiency.
Traditional Funding Structure
For touristic residential projects banks generally require the project to be de-risked with significant equity contributions (land and soft costs) and 50%+ unit pre-sales before and funds can be drawn. While some banks will provide project support in principle there is often no certainty over final lending terms until the developer is committed and the project is advanced.
Blended Capital Structure
This option can reduce the equity requirement from the developer and any junior equity investors and provide the ability to draw funds at the beginning of the project for land and soft costs. Blended facilities are more expensive and typically consists of both a preferred interest coupon (7%-12%) payable on drawn funds and a share of development profitability (10%-50%) depending on the project risk profile.
Purchaser Deposit Funds
It is often possible to also efficiently utilise an element of purchaser deposit funds reducing the overall funding requirement and increasing project profitability. It is now a legal requirement for all purchaser funds to be guaranteed (either by the lending bank or via a third party insurance policy) protecting the purchasers from losses in the event of project failure.
While this can be beneficial it is important to manage this aspect carefully to ensure the purchaser deposit requirement is maintained at a level that ensure the project payment terms remain competitive and does not negatively impact sales momentum.
Investment models
Mosaic shares its experience, expertise and project pipeline opportunities with investors of all types (HNWI, institutions, corporates) within a variety of models offering risk adjusted returns throught the applicable project capital stack.
For projects where Mosaic operates as the primary developer the group looks to syndicate all or part of the total capital requirement to partner investors either exclusively or (for larger projects) in addition to 3rd party project funders providing either a traditional equity funding structure, a blended capital facility structured as preferred equity and / or a junior equity facility.
Blended capital facilities replace traditional lenders (banks) and provide the project with a combination of both senior debt finance and also an element of equity. Although, depending on the applicable project, some lenders will provide up to 100% of the funding requirement it is more typical that blended capital lenders will provide a significant part (80%+) of the required capital structured as preferred equity.
Junior equity is sub-ordinate to preferred equity and generally required to complete the capital stack and manage lender risk.