Mirvac suspends AQUA redemptions
Key ratings house Standard & Poor’s (S&P) has placed three Mirvac property-related funds on hold in the wake of Mirvac suspending redemptions.
Standard & Poor’s said the funds placed on hold were the Mirvac AQUA High Income Fund, the Mirvac AQUA Enhanced Income Fund and the Mirvac AQUA Income fund, which had suspended the processing of application and redemptions for six months.
S&P said the manager had determined that a number of property-development related mezzanine loans to the funds were exposed via the funds’ underlying investments in the mezzanine debt pool.
The ratings house said that while no loss had yet been incurred by the funds as a result of the loans, the manager had taken action pre-emptively because the funds were expected to incur losses of interest, income and principal in what is an increasingly uncertain property market, with further softening in values expected.
It said the Mirvac AQUA Income Fund was not exposed to any impaired loans or mezzanine loans and there had been no impact on fund returns.
However, it added that the three Mirvac AQUA funds had a high proportion of common investors and the manager had decided to suspend processing of applications and redemptions.
In a message to investors and advisers, the chief executive of Mirvac Aqua, Stephen Tunley, said that given the current market conditions, the manager was undertaking a “stress testing” of its loan portfolios.
“In early July, Mirvac AQUA appointed a receiver and manager to one of these loans. As a result of this, the manager determined that several loans contained in the Mezzanine Debt Pool (into which the High Income Fund and Enhanced Income Fund directly invest) are impaired. These impairments may result in losses of interest and/or principal.
“The impaired loans total $39 million in value and comprises 20.4 per cent of the total assets (cash and mortgages) of the High Income Fund and 10.5 per cent (cash and mortgages) of the Enhanced Income Fund. For the purpose of clarity, the manager does not believe that the entire value of these impaired loans is at risk of principal loss,” Tunley’s message said.
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