Mezzanine and property investment opportunity

[Justcruzn]

I have been reading alot of discussion on this forum about mezzanine investing and Henry Kaye. Personally I couldn't care less about Henry Kaye and his companies, what I care about is getting a good deal and making my profit in the safest way possible. Anything that aids that end I am interested in and I will gain the knowledge and skill to apply the strategies to make it possible for me.

With that said over the last few months I have been working on establishing a network of investors and consultants for the purpose of Mezzanine investing. This has been going well and we have 3 successful mezzanine deals in place, each earning 20%, 35% and 30% per annum.

Currently I am working on 2 Mezzanine deals and I am looking for Joint Venture partners to work with both of these deals offer a minimum of 20%p.a. return on funds and the projects run for 12 months. If anyone is interested in participating in Mezzanine please email me.

Also if you are confused or have any questions relating to mezzanine investing I am always happy to help, no strings, if you are looking at puting your own Mezzanine deals together and would like to clarify a few things or you need assistance, again email me and I will help if I can.

Kind regards

Sean - [email protected]

 

[sctpc]

mezzanine sorry could you explan as i have never herd of it

 

[Justcruzn]

Mezzanine Funding or Investing is basically a Second Mortgage allowing the borower to increase their financial leverage.

For example, a developer lends 70% of constuction costs from the bank, he has 10% equity ( i.e. his own money) to use during construction. There is a short fall of 20% now he can either get a partner with 20% and pay him 50% or more of the profit the development will yield or borrow Mezzanine Money to cover the 20%.

Usually developers prefer Mezzanine funds because they are easier to manage than a partner or a bank. Interest on Mezzanine funding or investing starts from 17%-20%p.a. and can be as high as 35%- 60%p.a. depending on the structure of the deal.

Hope this helps.

 

[geoffw]

Obviously, for this return, the risk would be higher.

I have a colleague who was bitten badly by a variation on this. He was sold OTP, at halp price, provided he pre pay. The company went broke, and he lost the lot.

I have an acquaintance who was a big time developer- his view is that these sort of deals are only necessary when the developer is not so well established financially. This person did multi million dollar developments without having to use mezzanine style finance.

 

[Justcruzn]

So far the developers I have worked with are finacially viable or I wouldn't be investing with them, my solicitor and account thoroughly check out the developers personal and financial background before we even consider lending Mezzanine money.

We deal with butique developments usually 20-30 townhouses or apartments. The reasons our developers prefer using mezzanine money instead of their own money is because of leverage. And anyone interested in increasing their personal wealth knows the power of leverage. By using Mezzanine money our developers can have 3 or 4 delopments running at the same time, rather than only using his money and completeing 1 or 2 developments over the same period.

I have seen by the votes cast that alot of people think mezzanine investing is a scam! This is unfortunate, currently there are 3 or 4 institutions using mezzanine as an income generator for their wealthy clients. These institutions are National Bank private banking division (only clients with at least 1million in assets and $500k in free cash to invest returns of between 10% and 15% the bank keeps the rest), Macquarie Bank, Capital Holdings Group has a prospectus mezzanine fund that anyone can invest in starting from $5k and bosting returns of 12% to 17% p.a.

I think the only SCAM is if you have your money invested in a term deposit, managed fund or even worse superannuation.... you are definately getting scamed. I would not accept investment returns below 20% p.a. worst case 15%p.a. anything less and I would be getting ripped off. I mean it is a joke that the banks even try to advertise interest rates of 4.95%p.a. if you invest over $20k is that ever going to make any real difference to your life? I doubt it. Managed funds are loseing you money and super is a joke. The only other investment vehicle I would consider after mezzanine funding and property would be the stock market and have you been following the trends lately?

Anyway hope this helps, anyone who is interested in Mezzanine and thinks it might be a scam because they have spoken to people who have very little idea about how these things work please contact me and I can send you some articles published by some of the major banks in Australia about mezzanine investing.

 

[Jamie]

Hi Justcruzn,

Welcome to the forum...

I think you might find some people reticent to respond to your offer because you have appeared out of nowhere to offer returns over 20%. As a professional you must understand the uneasiness with which most people respond to claims of returns outside the normal parameters.

Can you tell us a little about yourself?

Are you affiliated with any company or financial institution?

What experience do you personally have in using mezzanine finance?

Do you personally have funds invested in the aforementioned "deals"?

Do you guarantee a minimum return?

What security do you offer?

These are but a few of the questions Im sure many people have with regard to your offer...

Best wishes,

Jamie

 

[Justcruzn]

Hi Jamie,

Thanks for the welcome

Can you tell us a little about yourself?

Well I am a commercial finance broker and have personally been involved with Mezzanine Funding for just over 6months. By this I mean actively investing and pooling funds for various developments.

Are you affiliated with any company or financial institution?

No I do not opperate my business through a third party company, I work with various financial institutions, as that is the nature of my business. But the mezzanine deals I do are done directly between the investors and the developers I am simply introducing the parties. I am also researching viability of the developments and the developers themselves.

What experience do you personally have in using mezzanine finance?

Personally I have been involved in 2 deals, the first was a 6 month loan secured by second mortgage and presales covering the first mortgage and second mortgage, I recieved 60%p.a. interest paid monthly ( mainly because I was the sole investor )

The second is still underway and it had similar security, with interest of 17%p.a. for 12 months also paid monthly ( although this deal was not strickly Mezzanine but more a second mortgage the amount lent was including first mortgage was less that 40% LVR so fairly secure )

Do you personally have funds invested in the aforementioned "deals"?

Yes, but I have run out of personal funds which is why I look for JV partners.

Do you guarantee a minimum return?

I do, the minimum return on investment for JV partners is 20%pa.

What security do you offer?

This varies from deal to deal, usually we will not leverage more that 80 - 85% of either the construction costs or the property value, this is secured by second mortgage with an agreement with the developer that is the development is severly delayed or it is not run to the liking of our quantity surveyor we assume control of the development and the developer loses any equity he has in the development (this usually means there are no nasty surprises), we also have a personal guarantee from both the developer, the builder and their spouses.

Obviously some opportunities have more security than others but we mitigate our risks as best we can. Each JV partner gets an investment overview and they will be made aware of the security as well as the risks involved, we hide nothing so that they can make an informed decision, we provide all the research on each investment (development or otherwise) including area statistics, comparable sales and rentals etc as well as a developers profile.

Please feel free to ask more questions if I have left anything out or not been clear in any area.

 

[Sunstone]

Dear Justcruzn,

It is good to see you taking the time to answer questions on this post.

In any investment community there are those who "want to get rich quick". However many of us advocate basic principles used by Jan Somers and who whilst taking some calculated risks and then taking action are conservative investors at the end of the day. (Definitely not in the easy come easy go category.)

Your name "Justcruzn" does nothing to instil confidence in ourselves in a highly risky investment opportunity. The fact that you have only been doing this for six months further raises alarm bells as you have no experience in taking care of solving problems when they WILL happen.

You mentioning Henry Kaye is such a way in your first post unfortunately did nothing to add to your credibility but instead raises more questions about it. (Have you read about the ASIC investigations into Henry Kaye?)

This post is not intended to cut you off at the knees (We are always open to new opportunities and ideas). However I have attempted to give you some practical feedback as to why you are only receiving a luke warm response.

Cheers,

Sunstone.

 

[Justcruzn]

Hi Sunstone,

Thankyou for the feed back, I can understand people being a little aprehensive about the topic I am disussing. I definately do not adhere to the "get rich quick" philosopy but I do not believe you have to be an investor with years of personal experience.

I have been envolved with Mezzanine funding for over 2 years but I have been investing personally during the last 6 months. My support network however has over 30 years of experience between them in all aspects of property financing including Mezzanine. This experience is the main reason I have decided to work with them. I have a strong belief in surrounding myself with people more knowledgable and experienced than myself, I find this comes in handy when you encounter the problems that do SOMETIMES come up.

Yes I have read about the ASIC investigations into Henry Kaye and from what I have read the investigations have very little to do with Mezzanine as an investment vehicle but rather the careless use of the phrase "ASIC licenced" or "ASIC Approved" depending on which articles you read, when in actual fact they should be saying "ASIC registered". The investigations are really alot of hype about not much.

This does not mean that I am a Henry Kaye advocate, I just like to focus on the facts. Which I think is a good quality in this field don't you!

Again I thank you for your feed back, and to tell you the truth I expected a less than welcoming response which is why my first post started the way it did, but hopefully these disussions might turn people arround

I have taken your advice on my knick and have changed it to "Kaizen" which I believe will be a more fitting knick - it means "constant improvement and change"

Keep investing

Sean