Peer Estate is making available to you a first mortgage investment opportunity secured by four individual properties owned by the borrower group. A commercial investment loan facility of $7,068,750 (the ‘Facility’), at a maximum Loan to Value Ratio (LVR) of 76.83% (69.4% net of cash deposits held as security assuming purchasers can’t complete) will be provided against the combined value of the properties.

The proceeds of the Facility are being utilised to refinance a current loan against property #1 and to provide for working capital to fund current acquisition opportunities by the borrower group.

Property #2 is subject to a contract of sale for $1,480,000 which is due to settle in early July 2019.

Property #1 is subject to a contract of sale for $5,700,000 which is due to settle in early September 2019.

The remaining secured properties are also for sale and are expected to settle periodically over the Facility term.

The proceeds of both property #1 and property #2 and from the subsequent sales of the remaining secured properties will be applied to reduce the Facility to an LVR of 65% over the Facility term. The LVR will be maintained at a maximum of 65% of any remaining security properties in the event that any others are sold.

The Facility will have a maximum term of 12 months with a minimum earn of 5 months at the initially funded amount.

Key Deal Points

  • Bridging finance for the sale of 4 commercial properties of which 2 are already sold on standard terms and deposits taken
  • 80% of loan principal likely to be returned by early September 2019 following the settlement of these 2 property sales
  • Loan term of 12 months with a minimum earn provision of 5 months on the initial loan balance
  • Interest Rate of 8.00% per annum, net to investors and paid monthly in arrears, may result in a higher yield if minimum earn provision is invoked
  • Maximum LVR of 76.83% (69.4% net of deposits), falling to 65% in early September following the 2 contracted property settlements
  • All security properties are within 5 kms of Melbourne CBD
  • Sponsor is a prominent and respected high net worth Melbourne developer family who are using the loan to invest as equity in future development projects.

PROPERTIES

All four of the security properties are located on the ‘city fringe’ in North Melbourne and Carlton less than 5kms from the Melbourne CBD. Independent valuations have been completed by Charter Keck Cramer between 16th and 18th April 2019 under instruction from Peer Estate. The total combined assessed value of the properties is $9,200,000.

Property 1: A development site located in North Melbourne which has planning approval for an eight-level mixed-use complex. The current improvements on the property include a two-storey office building which is currently not leased. The valuer has however commented that the office building may be leased under normal market conditions should this be required. A contract of sale has been entered into for the sale of this property which is due to settle in September 2019. A 10% deposit has been paid and is being held in the borrower’s solicitors trust account. In the event that the sale is not honoured by the purchaser, Peer Estate will have full recourse to deposit funds and will apply this to the reduction of the Facility. We have reviewed the contract and are satisfied with enquiries made as to the willingness of the purchaser to complete the settlement.

Property 2: A two-storey townhouse which has been configured as two separate non-dependant lots comprising a studio apartment on the ground floor and a two-bedroom unit on the first floor. This design has been configured to enhance the rental yield. A contract of sale has been entered into for the sale of this property which is due to settle in July 2019. A 7.6% deposit has been paid and is being held in the borrower’s solicitors trust account. In the event that the sale is not honoured by the purchaser, Peer Estate will have full recourse to deposit funds and will apply this to the reduction of the Facility. We have reviewed the contract and are satisfied with enquiries made as to the willingness of the purchaser to complete the settlement.

Property 3: The unit is situated on the ground floor of a mixed-use development. Currently utilised as a café by a long-standing tenant of eight years. The rental yield is in line with current market conditions and given the location of the property the valuer is of the opinion the premises could be readily re-let in the event of any vacancy.

Property 4: The security property consists of a commercial office suite located on the ground floor of a mixed-use development. This security has an adjoining single carpark space under a separate title which has been valued as a separate item by the valuer and while Peer Estate will have a mortgage over the attached carpark space - this car park space is not being included in our calculation for maximum LVR. The property is currently utilised as an office with a current lease agreement in place and the valuer has confirmed that a similar rental may be achieved if the property was again offered on the commercial rental market.

 

SPONSOR

The sponsor is an experienced Melbourne property developer with a 20+ year track record of undertaking medium density residential developments primarily in Melbourne’s inner-city suburbs. The sponsor has a reported net asset position in excess of $30 million and cash flow that is underpinned by rental income from various investment properties.

The sponsor is the sole director of the borrowing entity and will be providing a personal guarantee in support of the transaction.

Capital Structure Stack

  • 32.1%
    Equity $2,479,250.00
  • 67.9%
    Senior Debt $5,240,750.00

KEY RISKS

Market Valuation Risk

The risk that the primary security properties decline in value due to changes in market conditions or property specific factors.

Mitigant

Both properties 1 and 2 are subject to contracts of sale scheduled to settle in September and July 2019 respectively.

The sale/settlements of these security properties will significantly reduce the Facility and will result in a net reduction in LVR to a maximum of 65% of the combined remaining security property valuations.

All remaining security properties are located within well-established mixed-use precincts on the fringe of Melbourne CBD. These are historically considered areas of strong demand should Peer Estate be placed in a forced sale situation.

 

Interest Servicing Risk

The risk that the borrower is unable to meet interest commitments on the loan

Mitigant

The sponsor has an established relationship with Peer estate’s parent company, Qualitas and has a positive history with the group. There are sufficient recurring income sources available to the sponsor to meet interest obligations on the Facility.

Peer Estate has been provided with recent financials and having completed full due diligence is satisfied with the demonstrated trading and asset positions of the sponsor to be able to meet its debt servicing obligations.

 

Exit Risk

The risk that the borrower is unable to repay the Facility at maturity.

Mitigant

The borrower could refinance with another commercial lender at the maturity of the Facility.

It is expected that the settlement of Property 2 in July 2019 will reduce the LVR to 75%. Settlement of Property 1 in September 2019 will reduce the Facility to an LVR of 65% against remaining security properties which are also being marketed for sale with the intended settlement timings to occur within the 12-month Facility term to result with nil or little remaining balance at maturity.

Sale of one or more of the sponsors unrelated investments assets may be considered.

Project Questions

No questions have been asked.

Ask a question

Got a question that wasn't answered above? We're always happy to help, simply sign in to your account to ask a question now.

Project Updates

Jul 1 2019

Opportunity to reinvest

Dear Investor,

Carlton Senior Debt Facility – Reinvestment Opportunity

We are writing to you in relation to your sub-participation investment (Investment) in the Carlton Senior Debt Facility (Facility) as outlined in the original offer on the Peer Estate website at https://peerestate.com/invest/carlton-senior-debt-facility (Facility Offer).

As stated in the Facility Offer, one of the properties (‘Property #2’) that secures the Facility is subject to contract and settlement of this contract is expected to settle on 2 July 2019. When this occurs, the Facility will be paid down by approximately $1.11 million to approximately $6 million. This will result in approximately 15.7% of your capital being repaid to you on or about this date.

As the Facility is still open for investment, Peer Estate would like to offer you the unique opportunity to reinvest your share of the capital indicated above to be reinvested in the Facility by way of additional sub-participation investment under the same Facility Offer terms and returns as your original Investment.

Example of New Investment if Capital is Reinvested

The example below shows how the reinvestment would impact an existing Investment of $100,000 in the Facility.

Example - $100,000 Investment

Note the investor’s original Investment is to reduce by $15,297 to $84,297 following that investor’s share in the capital repayment. However, if the investor chooses to reinvest this repayment capital as offered, the investor’s share in the Facility will increase from 1.4% to 1.7% and all terms and conditions in the Facility Offer will continue to apply to the new investment (including the 8% per annum interest which is payable to investors net on a monthly basis).

On 6 September 2019, one of the other properties that secure the Facility is scheduled for settlement (‘Property # 1’), which if sold will result in a further $4.5 million or 75% of the then outstanding Facility balance repaid to all investors at this time. Thereafter, the remaining $1.5 million must be repaid before or on the maturity date of [17] May 2020.

If you would like to make a reinvestment in respect of your share of the capital repayment from the sale of Property #2, please sign, scan and return the attached letter to contact@peerestate.com by mid-day on Wednesday 3 July 2019.

Please call Sabrina or Kathleen if you have any enquiries regarding this reinvestment opportunity:

 

Sabrina Olomi

Associate Director

Phone: (03) 8678 2071

 

 

Kathleen Tepana

Marketing Director

Phone: (02) 8069 0211

 

Kind regards,

The Peer Estate Team

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