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Australian start-up launches A$100m fund debut

Profound Property Group, a Perth-based advisory and fund business formed by ex-Investec executives, is raising its debut vehicle. The firm is eyeing preferred equity infusions in projects in Perth and across Western Australia.

A private equity real estate fund management platform launched by former Investec executives Mark Darling and David Devenish has launched its first investment fund, aiming to provide preferred equity to developers and property investors in Western Australia.

The firm hopes to raise A$100 million (€61.6 million; $91 million) over three years, holding an initial closing of A$25 million by February next year, Darling told PERE today.

He said: “We are looking at providing a preferred equity facility where we can take a percentage of the profits proportionate to our involvement.” He added the vehicle, named PREF Capital and to be managed by an entity called Profound Fund Management, would not seek to leverage the equity investments. He added the firm was already at the due diligence stage on three transactions.

Western Australia is not typically a financial centre and all the investment banks that had exposure here, in the equity and mezzanine space, have retreated back to Sydney and Melbourne. This has left a large number of developers crying out for liquidity.

Mark Darling

The vehicle would invest over a five-year period in an array of real estate sectors including apartments, hotels and commercial properties, and seek an exit via a public listing or through a portfolio sale to an institutional investor, such as a superannuation fund or pension fund.

“Perth has not been immune to the financial crisis,” he said. “The banks have stayed strong but there has been a lack of liquidity, particularly for real estate. Western Australia is not typically a financial centre and all the investment banks that had exposure here, in the equity and mezzanine space, have retreated back to Sydney and Melbourne. This has left a large number of developers crying out for liquidity.”

Darling added: “A number of the smaller banks in the region have also decided to get out of real estate. This has left a huge whole between the debt and the equity while there is still need [from developers] for capital expenditure.

In addition, Darling said that demand for homes has increased in the area and that an improved Chinese economy had led to an increased demand for Western Australia’s natural resources such as iron ore, gold and diamonds as well as oil and gas.