Peer Estate is making available to you a first mortgage investment opportunity secured by two adjoining properties located at 105-111 Grices Rd, Clyde North VIC 3978 (the ‘Property’).

A commercial investment loan of $4,000,000 (the ‘Loan’) will be provided at a Loan to Value Ratio (LVR) of 57.4% measured against the estimated ‘on completion’ market value of the Property.  This also equates to a Loan-to-total-development-cost ratio of 70.7%.

The proceeds of the Loan will refinance existing land loans totalling $2,010,000 and provide $1,918,000 funds to assist with civil works and associated costs relating to the proposed subdivision of the Property into 21 individually titled residential lots.

The Loan will be drawn down in full (and interest will accrue on the full $4,000,000 loan) however Peer Estate will initially retain control of the $1,918,000 and will only progressively release same on a cost-to-complete basis (with an appointed Quantity Surveyor required to sign off on completion of each stage of the civil works).

The civil works are expected to take 6 months to complete, with sales of the individually titled lots expected to settle roughly another month thereafter.  However, providing a very comfortable buffer for any delays, the Loan will have a maximum term of 16 months (with a minimum earn of 8 months).

Key Deal Points

- First Registered Mortgage over the Property.

- LVR of 57.40% measured against the estimated ‘on-completion’ market value of the Property

- Interest Rate of 7.25% per annum to investors, net of a 0.75% per annum Peer Estate management fee, paid monthly in arrears.

- Clyde North is an emerging residential suburb located approximately 45 kilometres south-east of the Melbourne CBD.

PROPERTY

This Loan will be secured by a first registered mortgage over the subject Property, located at 105-111 Grices Rd, Clyde North VIC 3978, comprising of two adjoining lots of land which are to be subdivided into 21 individually titled residential blocks.

Clyde North is an emerging residential suburb located approximately 45 kilometres south-east of the Melbourne CBD. The subject site is an infill development, and as such the surrounding development represents established subdivisions which comprise of recently built single and double-story dwellings.

The 8,823 square metre Property is subject to a planning permit issued 18 February 2021, by the local council, allowing for the 21 lot subdivision. The lots will range in size from 250 to 315 square metres (with an average of 293 square metres).

The Peer Estate Loan will be utilised to refinance existing land loans and to provide funds for civil works (to be completed by a small but experienced 3rd party civil contracting firm) and associated costs to complete the subdivision. The borrowers have secured presales for 18 of the 21 lots.

An independent valuation was completed on 01 February 2022 under instruction from Peer Estate, with the valuer estimating the ‘on completion’ market value of the subdivided security Property to be $6,967,273 exclusive of GST.

 

SPONSORS AND BACKGROUND

The borrowers are two Special Purpose Vehicles (SPV) which hold the Property. The sponsors are two husband and wife teams (one of which are the sponsors behind the existing “Truganina” Peer Estate loan) who each run successful telecommunication business which were established over 10 years ago.

Each of the two telecommunication businesses have turnovers in excess of $3 million per annum with major clients such as NBN Co Limited and Service Stream Limited. 

Unlimited guarantees and indemnities are being provided by the 2 businesses as well as by each of the 4 sponsors personally.

Capital Structure Stack

  • 42.6%
    Equity $2,967,273.00
  • 57.4%
    Senior Debt $4,000,000.00

RISKS

Market Valuation Risk

The risk that the Property declines in value due to changes in market conditions or property-specific factors.

Mitigant

An independent valuation was completed on 01 February 2022 under instruction from Peer Estate, with the valuer estimating the ‘on completion’ market value of the subdivided security Property to be $6,967,273 exclusive of GST.

An LVR of 57.4% on the estimated “on completion” value of the Property provides an acceptable buffer against valuation uncertainty.

Furthermore, the borrower has secured presales for 18 of the 21 future lots which provides >100% debt coverage (i.e. the loan is expected to be repaid in full once the subdivision is completed which will trigger settlement of the pre-sales).

 

Interest Servicing Risk

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

Mitigants

The sponsors have established operating businesses whose profitability and cash flow generation have been assessed as being sufficient to service monthly interest on the Peer Estate Loan.

The sponsors own other investment properties which could be liquidated to free up cash to service or repay the Loan in need.

 

Exit Risk

The risk that the borrower is unable to repay the loan at maturity

Mitigant

18 of the 21 future lots are already presold (contracted) for a total of $5,858,564 (excl GST) thereby providing >100% debt coverage of the $4,000,000 Loan. The remaining three lots are expected to be presold prior to completion of the civil works.

The civil works are estimated to take 6 months to complete, with repayment of the Loan (from the settlement of the presales) expected to occur approximately 30 days thereafter (i.e. approximately 7 months from date of Loan drawdown).

The proposed Loan term of 16 months provides a very comfortable buffer should issues/delays be encountered during completion of the civil works and/or settlement of the presales.

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