MALLESONS Stephen Jaques has got in at the ground floor of a retail offering that some commentators say will “breathe life” into the Australian commercial mortgage-backed securities (CMBS) market.
Brookfield is seeking to raise $57 million via the Brookfield Secured Bonds Series A, which are limited recourse debentures that attract a fixed rate of interest via the retail channel.
Owing to the large amounts of cash building up in superannuation funds at the moment and the extremely poor rate of fixed interests being offered by banks, there is quite large potential for retail CMBS offerings.
The offer was relatively straightforward with the rental income from a single Grade A Sydney office tower that has been leased to the Australian Tax office for 13 years. The rental return is more than capable of covering the cost of distributions to investors over the life of the security.
The legal work for Brookfield Multiplex was completed by a Mallesons team consisting of M&A partner David Eliakim and senior associate Anand Sundaraj as well as partner Ian Edmonds-Wilson and senior associate Anny Chen from the firm’s banking and finance practice.
“Investors are looking for a better return than what banks are offering at the moment, but are risk adverse when it comes to equities. This product is somewhere in the middle being a secured investment,” Eliakim said.
From an issuers perspective this removes a reliance on the big four banks for investment funds, said Eliakim. He also said that the term of the product, in this case three years, is more than most banks are offering at the moment.
“There are a number of clients expressing interest in this sort of product at the moment and I should imagine there are a lot of investment bankers pounding the streets at the moment saying they can offer this type of product, so the potential is quite big,” he added.