La Trobe sells 360 Capital a $31.2 million Bathla project loan — ABC News Australia
In Australia, property investment and fund management company 360 Capital has acquired a senior loan of about $31.2 million connected to Bathla Group’s residential project on South Street in Marsden Park, in north-west Sydney. As ABC News Australia reports, the loan was sold by major private credit company La Trobe Financial.
A senior loan is the first-ranking mortgage debt in a commercial investment and has the highest priority in repayment. In August, La Trobe said it held $38.1 million in Bathla loans, including four residential loans and one development project loan. According to ABC, as part of this transaction, La Trobe sold the construction loan, recovering principal, interest and overdue payments and substantially reducing its exposure to Bathla.
Control over the project
The Marsden Park project comprises 72 apartments and, according to two sources familiar with the progress of construction, is nearing completion. 360 Capital said that 36 apartments had already been pre-sold under contracts worth $25.8 million excluding goods and services tax.
The ASX-listed 360 Capital Mortgage REIT had previously held an $8.9 million loan secured by the property. This loan had a lower repayment priority than La Trobe’s loan. The trust also invested a further $5.2 million in the transaction. Structures associated with 360 Capital now control the first and second mortgages over the project, giving them greater influence over completing construction and recovering the debt.
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Consulting firm Wexted has been appointed as external administrator. Its task is to expedite the obtaining of occupancy certificates and completion of settlements for the 36 pre-sold apartments. 360 Capital executive chairman Tony Pitt said the group expects to recover the full amount owed to it under the loan.
Pressure on private lending
Morningstar analyst Winky Tan noted that lenders holding a first mortgage are in a much stronger position to recover funds, while mezzanine lenders may lose most or all of their investments. She also warned that the financial outcome would depend on the sale of the remaining apartments and their prices amid a downturn in the property market.
In August, Centuria Bass and CVS Lane suspended withdrawals from some funds due to concerns about risks associated with Bathla. Australian regulator ASIC had previously warned about questionable asset valuations, opaque fees and insufficient disclosure in the private credit sector. Morningstar expects a significant slowdown in the growth of private credit funds in the near and medium term.
