March 2024 Newsletter
During March, Ark settled two new facilities at Newport in NSW and Deception Bay in South-East Queensland.
The Newport investment is the largest single facility that Ark has settled at $36.65 million. We had strong confidence in the land, proposed development and the Borrower, in a unique prime waterfront site, fronting Pittwater north of Sydney. Not surprisingly, the two week marketing campaign that the developer conducted during March yielded 170 expressions of interest, and has led to negotiations underway with 12 genuine buyers for the 8 waterfront lots.
During the month, Ark received its first independent research rating from SQM Research for the Ark Bedrock Mortgage Fund (Bedrock). The rating came in at 3.5 stars which for a fund that has only been established for 3 months is a strong result.
Bedrock issued its first units in December 2023 and over the last 4 months has steadily grown funds under management to in excess of $20 million. It is invested across a diversified portfolio of Ark Wholesale Mortgage Fund loans and has delivered investors a net return of ~11.25% p.a. since inception.
Bedrock sits alongside the Ark Wholesale Mortgage Fund as the two core funds for mortgage investment within Ark. Investors can choose between the two funds based on their individual approaches to risk and return, and how active they would like to be in the management of their individual investments. The key differences between the two funds is described as follows:
| Contributory Fund – Ark Wholesale | Pooled Fund – Ark Bedrock |
| Features Investors select a specific mortgage loan investment to contribute to, and invest in a syndicate alongside other investors choosing to invest in the same mortgage loan investment. Investor Type Typically active, willing to evaluate and invest in specific mortgage loan investment opportunities, preferring to maintain control over deployment of invested monies. Terms of Investments Contracted term, dependent on the syndicate (contracted) terms. Amount of Investment Typically minimum amount dictated by the Fund Manager. Security Arrangements Registered mortgage in favour of the Trustee, who acts on behalf of syndicate members if enforcement is necessary. Cashflow and timing Typically interest is paid monthly. Returns Known up front – monthly return or interest is specified in the syndicate investment memorandum. | Features Investors subscribe for units in the fund and their funds are pooled with other unit holders to make investments into a series of mortgage loan investments. Bedrock invests in numerous mortgage loan investments only in the Ark Wholesale Mortgage Fund, alongside other syndicate investors Investor Type Typically seeking to diversify their investment to reduce risk, not wishing to have all their investments concentrated in one or a few mortgage loan investments. See the benefit of having a professional fund manager managing investment decisions on their behalf. Term of Investment Minimum initial term, then redemption typically available periodically. Amount of Investment Typically minimum amount dictated by the Fund Manager. Security Arrangements Registered mortgage in favour of the Trustee, who acts on behalf of syndicate members, including Ark Bedrock if enforcement is necessary. Cashflow and timing Distributions are paid monthly Returns Monthly returns depend on the performance of the fund in a given month, but can be reliably estimated. Ark Bedrock’s returns are determined as follows: The interest rate on the mortgage loan investments paid to syndicate investors + the loan management fee income paid to the Trustee by the borrower, and rebated to Bedrock by the Trustee (min 1%) – the Fund Management Fees (max 1%) |
William Gu
Investment Operations Officer
Ark is pleased to introduce William Gu, our newest addition to the Ark team as our Investment Operation Officer! William brings with him a wealth of experience, having begun his banking and wealth management journey with Westpac, where he served as an Onboarding Manager for three years. Following this, William continued to expand his expertise by joining companies like RMBL Investment as a Commercial Lending Analyst.
William’s enthusiasm and passion for contributing to team success are palpable, and we’re thrilled to have him on board. We’re confident that his skills and dedication will make a significant impact as we continue to grow and succeed together.
We look forward to continuing to provide sound investment opportunities for investors throughout the coming year, and superior debt and equity solutions to our development partners.
Open for Investment Opportunities
The Moorings, Newport NSW
Term: 12 Months
LVR: 65%
Interest Rate: 10.50% p.a. (variable, linked to RBA Cash Rate)
Maturity: 11/03/2025
The Base, Oakleigh VIC
Term: 20 Months
LVR: 60%
Interest Rate: 9.75% p.a. (variable, linked to RBA Cash Rate)
Maturity: 02/02/2025
Morayfield, QLD
Term: 20 Months
LVR: 65%
Interest Rate: 10.50% p.a. (variable, linked to RBA Cash Rate)
Maturity: 15/01/2026
Investment and Performance
Deal Settled: 19
Funds under management: $303.8 Million
Weighted Average LVR (Current): 61.55%
Forecast Investor Rate: 11.20%
Investment Updates
Prestons 135, NSW
Construction works are now, complete and the project has achieved practical completion. An Occupation Certificate is expected to be issued imminently.
The refinance of the facility is well progressed however, ARK expects that the facility will now be repaid in mid-April due to delays from the incoming lender.
Banks, ACT
The Borrower continues to progress the refinance and ARK anticipates that the facility will be refinanced on or prior to the maturity date.
Kingaroy, QLD
The Borrower continues to await a response for the second round of government grants which is anticipated within the next month.
ARK expects the facility to be repaid on or prior to the maturity date via a refinance from an alternative financier.
Oakleigh, VIC
Construction continues to progress with piling and foundation works 80% complete and the ground floor concrete slab now 50% complete.
The first construction draw under the facility is anticipated to occur in April 2024 as the March progress claim, which was originally intended to be funded was instead funded, by the Borrower to satisfy their upfront equity requirement.
Morwell, VIC (Mezzanine)
All project settlements except one have occurred at Mernda, with the remaining lot expected to settle in early April 2024.
Stage 1 internal civils at Tatura are 95% complete. Progress has been made with Vic Roads in relation to the intersection works due for completion prior to commencement of Stage 2. A Section 173 agreement is expected to be entered into with Vic Roads within the next few weeks and registration is expected in the next 8 weeks. Stage 2 bulk earthworks and sewer works are complete. Approval is imminent to continue internal civils with the expectation of practical completion by August 2024
The Borrower is working through commencement of bulk earthworks for Stages 1, 2 & 3 at Morwell with a contractor soon to be appointed. The contractor is expected to be established on site in mid-April.
Ballarat North, VIC
Gazettal of the Ballarat North PSP is still anticipated to occur in mid-2025. The Borrower continues to work through the planning process.
Negotiations have commenced with the Borrower to extend the facility a further 12-months, following expected maturity in June 2024.
Mount Cottrell, VIC
From the four properties within the security pool, two have now been sold with settlement scheduled in early April 2024. Partial repayment of the facility is to occur at settlement. ARK is in discussions with the Borrower to refinance the existing facility which matures in June 2024 into a new facility post-settlement of the properties
1383 Dohertys, VIC
Progress continues to occur with the town planning in relation to the Oakbank Precinct Structure Plan (PSP) as the due diligence phase from VPSA and council is expected to be finalised in the next 6-12 months. The PSP estimation remains as being 2-3 years from the completion of the due diligence phase.
ARK is currently in discussions with the Borrower to refinance the facility which expires in June 2024 into a new facility to expire at the end of September coinciding with the property settlement date.
Leakes Road, VIC
The property has been sold with settlement scheduled to occur on 25 September 2024. ARK is currently in discussions with the Borrower to refinance the facility which expires in June 2024 into a new facility to expire at the end of September coinciding with the property settlement date.
Kyneton, VIC
The facility is set to expire in May 2024 and ARK is currently negotiating a refinance with the Borrower into a new 6-month facility.
The Borrower continues to work further design, leasing, and sales to be in a position to commence construction at the maturity of the extended term.
Grantville, VIC
The Borrower continues to progress through the planning phase and is expecting to obtain a planning permit towards the end of the first quarter of 2024 which ARK is closely monitoring.
ARK is actively discussing with the Borrower regarding extension or refinance ahead of the facility maturity in May 2024.
Mt Barker, SA
Titles have been issued for the project and settlement for several lots have already been completed. Further lot settlements are scheduled to occur throughout the forthcoming month.
ARK still expects that the facility will be repaid slightly ahead of the maturity date in June 2024.
Gungahlin, ACT
The Borrower continues to explore an alternative development plan for the project as a result of the favourable rezoning of the area where the property is located.
It is likely that the facility will be refinanced into another land facility at maturity which is also expected to be provided by ARK.
Burpengary, QLD
Works continue to progress well onsite.
Key milestones achieved since the previous month are:
– Final internal roadway seal has been completed.
– Stormwater drainage completed.
– Electrical conduiting completed.
The targeted date for works to be completed is end of June 2024.
The Borrower has contracted sales for 11 lots with only 4 remaining to be sold. The titles for the lots are expected to be issued in late April. Settlements are expected to commence in May or June.
Baldivis, WA
The project experienced some delays over January & February in relation to the Builder finalising the construction drawings and obtaining building approvals. The first progress claim has been received and is currently being assessed by the Quantity Surveyor in relation to some nominal preliminaries and site establishment costs. The initial site cut is now expected to commence on 2/04/2024 and an updated construction program with has been supplied with a forecast practical completion date of 20/09/2024. The program is currently under review by ARK and the Quantity Surveyor.
Margaret River, WA
The sales and marketing for Stage 1 continues to progress well with only 4 out of the 75 individual lots remaining unsold. Settlements continue to occur monthly which ARK is closely monitoring, whilst assessing the suitability of the termination date of the residual stock facility. The facility will likely need a short term extension of up to a maximum of 90 days.
Sellicks Beach, SA
The Borrower continues to advance negotiations with a civil works contractor for the target commencement of works in Q2 2024.
ARK is mandated on providing funding for the construction facility which will be considered following a comprehensive assessment of the contractor once they are appointed.
North Melbourne, VIC
Significant interest has been received for the project with large volumes of website traffic being observed by the Borrower. This interest has translated into additional sales being achieved during the month.
The Borrower has advanced discussions with their preferred builder and expects a construction contract to be executed shortly. Discussions between the Borrower and their preferred lender for the construction facility continues to progress in anticipation of finalising a refinance prior to the facility maturity date.
Mont Albert, VIC
Preparation for the amended planning permit submission for a boutique hotel scheme is well underway. The Borrower expects to complete the final design for the hotel within the next few months and to receive the updated planning permit by the end of 2024.
Toowoomba, QLD
Works on site have been progressing well:
Construction
– Bulk earthworks on the remaining lots will be completed shortly.
– Stabilisation works and topsoiling have commenced.
– Stormwater infrastructure is progressing well with all internal stormwater pipes to be finished in the coming weeks.
– Electrical works and road crossings have commenced.
– Potholing for existing services for the external water main has resulted in an old comms line being found on the current alignment.
The Borrower is liaising with council and surveyors/engineers to propose an alternative alignment which will be resolved in the coming weeks prior to construction starting on the works.
Box Hill, VIC
The Borrower continues to work through fully leasing the first stage of the project as the top priority. Increased leasing and marketing activity will continue in the near term.
Financial close of the facility was achieved during the month.
Since the hoarding was erected on site, over 170 expressions of interest have been received and discussions have commenced with 10+ genuine buyers. Additional interest is expected to be generated once marketing and advertising are launched. The project webpage is anticipated to go live in the coming weeks whilst ads will be placed in leading property magazines such as Domain.
Works on site are tracking to programme with demolition and site clearing in progress and earthworks commencing imminently.
The Borrower has made significant progress since financial close of the facility. A building contract has now been executed with one of Australia’s largest civil contractors. Further sales continue to be achieved, further underpinning the project fundamentals.
ARK anticipates that the facility will be refinanced into a construction facility prior to the maturity date as most major conditions precedent are on track to be satisfied.
Bedrock Mortgage Fund Update
The new Ark Bedrock Mortgage Fund followed up its distributions of 0.96% (11.26% annualised) in Dec 23 and 0.95% (11.24%) in Jan 24 with a return of 0.90% (11.27%) in Feb 24.
The Fund ended February with $8.9m in FUM and investments in 8 mortgage facilities across Melbourne, Sydney, Adelaide, Margaret River (WA), and Toowoomba (Qld). A further $11.6m in applications was received for unit issue on 1 March 2024, bringing FUM to $20.5m in the fund’s first 3 months of the fund.
The fund has thus far received significant interest from new investors attracted to the pooled fund model of development investing, but most pleasing is the support (approx. 50% of FUM) from long term Ark investors attracted to Bedrock’s simple diversification strategy, the returns being delivered and their past experience with Ark and our approach to lending and investment management.
Available to: Wholesale investors
Min invest: $50,000
Distributions: Paid Monthly
Redemptions: Quarterly after minimum initial term of 6 months
DRP: Distribution Reinvestment IS available
Unit Issues: First day of each calendar month
Updates: Annual distribution statements and quarterly updates of the Fund’s performance
Investments: At least 85% in registered 1st mortgage securities with up to 15% potentially invested in registered 2nd mortgages
LVR: Average 65% across the 1st Mortgage investments
Fees: 0.75% Fund Manager fee
Direct Costs: Up to 0.25% direct costs