REAL ESTATE
“Location, Financials and Risks are the key metrics deciding project feasibility.”
ROXX GROUP
At Roxx Group we work closely with developers on the entire project cycle. We assist in finding the suitable construction partners, tenants and formulating an exit strategy. After ascertaining a structured and detailed business case, we incorporate a project specific SPV to fund the project with you. Our role is to support and eventually realise your project. The operating word being “your”. Always!
PROJECT FEASIBILITY CHECK
Shortlisted sites based on initial internal parameters are put through feasibility checks. Ground feasibility, technical due diligence and the micro market analysis is carried out. Roxx Group usually enters into projects where the zoning is in place and total built up area is already approved. Further development feasibility is checked with local architects and engineers. Similar completed projects are used as a base to calculate construction costs and further Gross Development Volume. The in house legal team starts performing due diligence on the asset and vendor. Plots with a long ownership history are preferred.
EXIT STRATEGY
For commercial developments, potential tenants are sourced before the acquisition of the land. Ideally, the target is to have 50% area rented before the acquisition. For hotel and similar developments, the lease agreements with the operators are signed before the land acquisition. Very often the head of terms with a forward buyer is also agreed and a further forward purchase agreement signed once planning permit is secured. For residential developments, either the whole project is sold to one institutional buyer or, in case of retail sales- marketing, retail debt partners for buyers are onboarded. Pre-sales start after the planning permit is secured. Retail exit is only carried out in case of trophy /AAA micro-locations
CAPITAL STRUCTURING
Detailed dynamic cash flows are planned. Investor outputs, return calculations are carried out. Roxx Group starts communicating with potential equity and debt capital partners. Based on the project, the deal can be structured either as a highly leveraged whole loan or a hybrid of senior loan + equity + mezzanine loan. The deployment plan, tax structuring, operating cash flows are performed before the acquisition of the plot.
MODE OF INVESTMENT
On a project, by project basis, a coupon is issued by Roxx Group for equity investors as limited partners for both Open-End and Closed-End deals.
Closed-End Deals:
1. Operator with a binding lease agreement in place before land acquisition.
2. Head of terms with the forward buyer signed before land acquisition and planning.
3. Forward purchase agreement in place after acquisition and planning before construction equity is deployed
4. Down Payment from forward buyer on construction permit is favoured.
Open-End Deals:
Operator with lease agreement in place but the exit is secured along the way during the planning phase. Roxx Group ensures a hard exit is secured at least 12 months before construction completion.
APPROACHES
Institutional whole loans:
First charge on the land register of the property. High leveraged whole loans are preferred on low risk projects with either forward funding or hard exits in place. The interest rate varies between 2.25% - 3.5%. A whole loan is injected directly at the PropCo level with Loan to Cost between 88%-95% or Loan to Value between 75- 82%. The remaining is common equity invested either by the company or its development partners. Interest payments are reinvested into the scheme and paid out on the exit along with the principal.
Mezzanine Debt:
Mezzanine loans are used with a senior bank debt in place. The loans are secured on the land register at the 2nd place after the senior loan. The company prefers to deploy mezzanine during the construction phase after exits are in place to manage credit risk.
Convertible Debt:
To provide more security to investors during the acquisition and planning phase, a convertible debt note is issued. The loan is converted into equity at a pre-agreed valuation and terms once the construction permit is secured and a hard exit is in place.