MILESTONE DOMESTIC SCHEME III (MDS III)
Milestone Domestic Scheme III is a India focused SEBI registered Real Estate Fund aimed at generating superior returns by investing in medium term structured real estate projects which have made significant progress and have temporary funding gaps.
About Milestone Capital Advisors Limited
• Significant experience in Real Estate and Private Equity - The Advisors' proven investment strategy of applying the rigor of private equity evaluation approach to real estate opportunities ensures attractive returns on capital
• Advises 5 India focused real estate funds aggregating Rs. 2,000 crores
• Team has a collective experience of advising investments of over Rs. 4,000 crores in various real estate projects
• Advised on similar deals in the past with quality developers
• Delivered consistent returns to investors even in difficult market conditions
o Advises India's first private REIT-like fund structure (in partnership with IL&FS Investment Managers Ltd.) which has distributed quarterly returns to investors (for 11 quarters in IL&FS Milestone Fund-I and for 6 quarters in IL&FS Milestone Fund-II)
o Milestone Domestic Scheme-I, since its launch in 2007 has finalised exits for 12% of it corpus at investment multiples ranging between 1.25x - 2.04x
o IL&FS Milestone Fund-I, since its launch in 2007 has finalised exits for 17% of it corpus at investment multiples of over 1.50x
Key Fund Terms
Fund Size | Rs. 500 crores plus Green Shoe option of Rs. 250 crores |
Fund Type | SEBI registered Structured/Mezzanine Real Estate Fund |
Fund Life | 3½ years (option of extension of two terms of one year each) |
Minimum Commitment | Rs. 1 crore for Banks and Institutions Rs. 25 lakhs for Corporate & Trusts Rs. 15 lakhs for Individual investors (Rs. 10 lakhs if payment is made in a single installment) |
Drawdown | Option 1: Upfront payment (Minimum Rs. 10 lakhs) Option 2: 40% upfront and balance in two installments of 30% each (Minimum Rs. 15 lakhs) |
Commitment Period | 18 Months from final closing date |
Hurdle Rate | 12% (Pre Tax, Post Expenses) p.a. |
Target Return | 22% (Pre Tax, Post Expenses) p.a. |
Carried Interest | 15%* |
Management Fee | Annual Management Fees: 1.5% of commitment amount One Time Setup Fees: 2% of commitment amount |
Redemption And Distributions | Capital redemption expected to start 3rd year onwards Possibility of annual yield distributions |
Investment Limits | Single Company - Upto 15-25% of corpus Single Developers/Group Level - Upto 25-40% of corpus |
* Carried Interest will be charged aſter distribution of total investment amount and hurdle rate of return with catch-up
Investment Strategy
· Investment in high quality projects which are either under construction or projects which are to be launched within 6 months
· Focus on Top 8 cities along with development partners, who have the market expertise, construction management capacity and good track record of project execution
· Investments are based on strong diligence and carry a preferred fixed return with an upside variable return
· Structured/Mezzanine Financing - Lack of debt financing, equity funding, fall in real estate prices coupled with refinancing needs have created funding issues and thereby created opportunities for Structured/ Mezzanine Finance which have characteristics of both equity and debt
Key Advantages
· Structured / Mezzanine Financing - Provides returns higher than debt and has lower risks than equity
· Attractive Returns: Superior returns at lower risk through investment at fixed preferred return with built in upside variable return
· Lower Risk: Since investment will be made in projects which have made significant progress, the development risk is significantly lower
· Short Tenure of 3½ years: Unlike Development finance for Real Estate, Structured / Mezzanine Finance is usually for a predefined shorter duration
· Relatively lower annual management fee (1.5% p.a.) compared to the market practice of 2% p.a.
· Share in profits (15% with catch-up) only after the investors receive their hurdle rate of return (12% pre-tax annualized)
Taxation
• Fund would mainly have interest income and long term capital gain at the time of sale of project
• The Fund has been structured as a discretionary trust. There is no double taxation as per Section 164 of the Income Tax Act. Fund will be paying the tax as per Section 164 of the Income Tax Act
• Interest income arising from Portfolio Company is taxable at maximum marginal rate applicable to Fund
• Long term capital gain tax on sale of securities - currently 20% (excluding applicable surcharge & cess) in unlisted securities
Other Details
· Cheque/DD to be drawn in favor of: "Milestone Domestic Scheme III "
· Registrar and Transfer Agent: CAMS
Enclosure: Product Presentation
Application form and the Contribution agreement
