M Capital appreciates that each property transaction will vary from deal to deal.
The following criteria set out broad lending parameters and are offered as a useful guideline.
Borrower
- must be experienced with a demonstrable track record
- verifiable financial statements of project and borrower
- clean credit history
- must contribute a portion of equity
- borrower and / or shareholders prepared to provide personal guarantee
Financials / Security / Monitoring
- Deal size : ZAR2,0 million and ZAR20,0 million investment per transaction
- Ideally not greater than 90% loan to value exposure, or cash flow backed
- Return on project costs must be in excess of 35%
- Senior debt funding to be in place prior to disbursement (preferably to be facilitated by the CMC Property Group)
- Pre-sales to cover Senior Debt
- 2nd charge over assets and pledge of shares
- Step-in rights to be afforded to M Capital
- M Capital to have the right to settle senior debt and take over senior debt security
- Performance bonds / Collateral warranties from Main Contractor and Professionals to be in place prior to disbursement
- Fixed-Price building contracts preferred
- Project monitoring by Quantity Surveyor appointed by M Capital on a ‘Watching Brief’ basis
- Legal monitoring by attorney appointed by M Capital
- Personal surety
- Restrictive undertakings
- Borrower subordination of profit in project
- Board representation
Term of loan / Exit Strategy
- Average term 12 months (with shorter periods for bridging finance)
- Initial upfront fee will be deducted from capital raised to cover legal, due diligence and closing costs
- Generally no prepayment penalty
- Interest rolled up / capitalized for the period
- Proceeds from pre-sales must be utilized to settle Senior Debt first, M Capital facility second, prior to distribution to Borrower
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