Mezzaine Contract

[Aikido]

Hi all,

Was wondering if ppl can give me some suggestions as to what conditions I should have in my contract to protect my investment as much as possible in this type of investment. Any ideas would be greatly appreciated. Also a recommendation of a good solicitor would also be a great help.

Thanks

 

[NigelW]

Originally posted by Aikido
Hi all,

Was wondering if ppl can give me some suggestions as to what conditions I should have in my contract to protect my investment as much as possible in this type of investment. Any ideas would be greatly appreciated. Also a recommendation of a good solicitor would also be a great help.

Thanks

You definitely need to see a lawyer!

Some observations:

If it's true mezz then your position will be subordinated to the senior debt at least. Is there an account lock up mechanism which prevents payouts to equity in preference to you

What security are you getting - ie real property mortgage, fixed and floating charge, negative pledge? Do you have a priority deed between yourself and the senior lenders. Have you had your own valuation conducted? What if they get 1/2 way through building and fold. The bank will exercise power of sale under the mortgage and what will you get if you don't have registered security?

What about the credit of the builder/developer? Have you investigated their past projects? What key subbies are they using?

Are you taking directors guarantees?

What's your payback time. Are you getting a superior rate of return on your equity to justify the higher risk profile?

There are LOTS of issues to understand here.

let me repeat: You definitely need to see a lawyer!

Good luck
N

 

[geoffw]

Apart from all the above... If the word "mezzanine" is not included in the thread (it was misspelt in the original subject) people will not be able to find this later when they search

 

[Aikido]

Apart from all the above... If the word "mezzanine" is not included in the thread (it was misspelt in the original subject) people will not be able to find this later when they search

damn......... knew I should have paid more attention at skool

Thanks for your reply Nigel. The points you raise are very good ones. In regards to the due diligence on the developer that is something that would be easy enough to do.

My main concern is even with the DD done on the developer my main protection would be in the contract. What suggestion can you give regarding conditions that I should have in the contract as a minimum? Or what suggested structure would you have if it was your money?

BTW does anyone recommend a good solicitor or where to look for one who is worth the money.

 

[geoffw]

Here's some thoughts from FIDO:

http://www.fido.asic.gov.au/fido/fi...ine+investing+and+2+golden+rules?openDocument

(The site is good for other investment matters as well- see http://www.fido.asic.gov.au/fido/fido.nsf )