• Amortisation

    This is the process of or the requirement to pay down principal debt over the term of the loan. An amortising loan is in contrast to an interest only loan which requires no principal amortisation over the term of the loan and only requires interest to be paid.

  • Basis Point

    This is 1/100th of 1% or 0.01% and also referred to as bps. i.e. 100bps is one per cent

  • Builder's Side Deed

    This is a deed entered in to between the builder, the sponsor (the borrower) and the lender to govern the relationship between the parties and to ensure a smooth delivery of the development project.

  • Capital Stack

    This is the mix of debt and equity and types of debt and equity.

  • Capitalisation Rate

    This is the forecast or expected yield and is used to calculate market value.

  • Capitalised Interest

    This is interest that is not paid by the borrower during the term of the loan but rather added to the loan balance to be paid at a later date, usually upon repayment of the overall loan.

  • Contamination

    This is in respect of a property and means that there is the presence of pollutants in, on or under the property or in the ambient air and emanating from the property. Some pollutants can be more hazardous than others and where pollutants are known or expected, we would ordinarily seek an environmental report to understand the actual risk and steps to remediation and/or habitation.

  • Cost to Complete

    This is the forecast amount needed to complete the development of the property. A lender generally lends to a development project on a cost to complete basis which means that they will only allow funds to be used so long as there are sufficient funds remaining from the loan to complete the project.

  • Debt

    In the context of the loans being offered on Peer Estate, this is the amount of money borrowed under the loan.  Debt can also include any present or future, actual or contingent debt or other monetary liability in respect of money borrowed or raised.

  • Debt Service Cover Ratio

    This is the ratio of property income to total debt servicing requirements for the property. These requirements would include both interest expense and amortisation requirements. This ratio measures the ability of the sponsor to meet the costs of the loan for the property from the income of the property (and other sources if agreed).

  • Development Application (DA)

    A Development Application (DA) is a formal request for consent to carry out development. This type of Development Approval is the most common way of getting development consent in NSW.

  • Development Costs

    This is the sum of all costs relating to the development and would ordinarily include finance costs, construction costs, land acquisition costs, marketing and selling costs, interest, fees, taxes and other related costs for the development.

  • Equity

    The difference between the value of the property and the debt on the property. Equity could be a combination of cash and Uplift.

  • Event of Default

    A condition or circumstance which entitles a lender under a loan agreement to demand immediate and full repayment (sooner than the loan was due for repayment). The reason for this is to ensure that the lender can act early if it appears that the borrower or sponsor may not be able to repay the loan in the future.

  • Facility Agreement

    The loan agreement (or contract) between the borrower and the lender.

  • Financial Close

    Financial Close is the date the loan is first provided by the lender to the borrower.  This occurs on the date on which the conditions precedent set out in the Facility Agreement have been satisfied (or waived in writing).

  • Gearing

    This is the ratio of debt to total assets. It can be used on a property only basis but also across all assets of a business or sponsor.

  • Guarantee

    This is any guarantee, indemnity, suretyship, letter of credit, letter of comfort or any other obligation to provide funds or to be responsible for any debt or monetary liability of any kind.

  • Interest

    Interest is the charge for the opportunity of borrowing money and is generally expressed in percentage terms on an annual basis.

  • Interest Cover Ratio

    This is the ratio of property income to interest servicing requirements. This ratio measures the ability of the sponsor to meet the interest costs of the loan only (but not any other costs such as amortisation) from the income of the property (and other sources if agreed).

  • IRR (Internal Rate of Return)

    This is measure of profitability. Technically it is the discount rate that makes the net present value of all cash flows from a particular investment equal to zero. It is similar to the rate received on an investment on an annual basis. As it is a standardised formula it is often used to rank investments of varying types. Generally, the higher the relative IRR, the more desirable it is to undertake that investment over another one.

  • Junior Debt

    This is loan debt that has lower priority of repayment than another debt and often benefits from lower ranking mortgage security (such as a registered second mortgage).  Often this is mezzanine debt as compared to senior debt. Also see Mezzanine Debt.

  • Loan to Cost Ratio (LTC)

    This is the ratio of the loan debt to total development costs. Upon completion of the development, this ratio would be less useful and would revert to the Loan to Value Ratio.

  • Loan to Value Ratio (LVR or LTV)

    This is the ratio of the loan debt to the valuation of the property at the time of the last valuation. This ratio measures the gearing of the property and is a measure of the amount of risk. The higher the ratio, the less buffer there is between debt and expected sales proceeds if the property was put up for sale. Also, the lower this ratio, the more equity the sponsor has invested in the property.

  • Mezzanine Debt

    This is loan debt that is subordinated to senior debt and can generally only be repaid after senior debt. It generally benefits from less security than senior debt and is generally secured by way of a registered second mortgage and other second ranking security.

  • Mortgage

    This is a legal agreement by which the lender lends money at interest in exchange for taking title of the subject property. The title is returned to the owner upon repayment of the debt. Different lenders can rank in preferred order on the mortgage so that one lender (first ranking) is repaid in priority to another lender (second ranking).

  • Pre-Sales

    These are contracted sales that occur prior to the completion of the development and will have added to conditions that a regular contract of sale such as the timing of when the development is completed.

  • Preferred Equity

    Junior Debt or Mezzanine Debt is generally a loan that is secured by a property and ranks ahead of any equity but behind the senior loan on the property. Preferred Equity, on the other hand, is an equity investment in the property-owning entity. It is not secured by the property but rather by an interest in the entity investing in (or owning) the property.

  • Preferred Return

    A Preferred Return is paid to investors before a sponsor receives any share of the cash flow.

  • Priority and Subordination Deed

    This is the agreement entered in to between different ranking lenders (commonly senior lenders and mezzanine lenders) on the same asset which governs their relationship including which lender ranks in priority to the other and is repaid first. It also confirms which lender can act under certain scenarios.

  • Qualifying Pre-Sales

    Means a sale of all or part of a property (such as a single apartment from a large apartment project) which meets the requirements of the loan documents. These requirements could include items such as the amount of the deposit, the sunset date, the resident status of the purchaser and other such items.

  • Quantity Surveyor (QS)

    The QS is the technical advisor appointed by the lender to advise and report on the status of the development project. The QS's report will confirm items such as works completed to date, adequacy of contingency, project buildability and timeframes and cost to complete. The report will also contain certifications, commentary, opinions, particulars, details, evidence and other information and documents required by the lender.

  • Security Agreements (specific or general)

    A general security agreement used to be known as a “fixed and floating charge”. This is a security agreement that covers all the assets of the borrower, and not just tangible property assets. The benefit of using a general security agreement is that it is not necessary to list out every single asset that is being used as security. A specific security agreement is one of a specific non-property asset that is then registered on the personal property securities register (PPSR) so that any other lenders can see whether a borrower has other obligations. Different lenders can rank in order of repayment for both general and specific securities.

  • Senior Debt

    This is the first ranking or main debt on a property.

  • Servicing

    The amount of money required to make the required repayments of a loan (including interest and amortisation).

  • Sponsor

    The party responsible for the management of subject asset under a loan. Whereas the borrower may be a special purpose entity set up purely to borrow the funds, the sponsor is the individual or company ultimately responsible for the management of the loan and property.

  • Sunset Date

    The date at which the specific contract is void. A sunset date is most commonly used in reference to a presale contract whereby a developer is given a certain time limit to complete the project and deliver the completed apartment to the purchaser. The lender will want to make sure that there is extra time between the forecast completion date and the sunset date to take in to account potential delays.

  • Term

    The time allowed under a loan between financial close and repayment.

  • Uplift (or Land Value Uplift)

    The difference between the value of the property and all debt and cash equity related to the property. As an example, a property might be worth more today than what was paid for it a number of years previous. This difference is the uplift.

  • Valuation

    A valuation is a written market report prepared by a Valuer and which opines on the value or worth of the subject property.

  • Waterfall

    This is the order that repayment proceeds are directed under a loan. As an example, a waterfall may state that the senior debt is repaid first, then the fees and costs of the senior debt, then the mezzanine debt, then the fees and costs of the mezzanine debt and finally anything that is remaining to the sponsor.

  • Wholesale Investor

    Generally people investing in securities and other financial products must, under the Corporations Act 2001, be given a regulated disclosure document such as a prospectus or product disclosure statement. However, the Act has some exemptions from these requirements.

    One of those exemptions is the offering of financial products to a person (either a natural person or a legal person) who is the subject of a current certificate from a qualified accountant certifying they are a wholesale client. To receive this certificate, the accountant must confirm that the person:

    • had a gross income of $250,000 or more per annum in each of the previous two years; or
    • has net assets of at least $2.5 million.

    If the amount invested is more than $500,000, the person is considered to be a wholesale client and an accountant’s certificate is not required.

    You can also refer to the ASIC website here for further information

    There are other ways to meet this requirement. You may need to speak to your accountant, or alternatively contact us.

  • Yield

    The return received on an investment, shown as a percentage of the amount invested.

Peer Estate, an authorised representative under the Qualitas Securities P/L A.S.F.L. 342242