Peer Estate is making available to you a first mortgage investment opportunity secured by a property located at 69-73 Riesling Street, Corowa NSW 2646 (the ‘Property’).

A commercial investment loan facility of $630,000 (the ‘Facility’) will be provided at a Loan to Value Ratio (LVR) of 70% measured against the purchase price of the property.

The proceeds of the Facility will be utilised to assist the acquisition of the security property.

The Facility will have a maximum term of 12 months.

Key Deal Points

- First Registered Mortgage over the Property.

- Corowa has a population of approx. 5,482 and is located approx. 611 kms southwest of Sydney and approx. 300 kms northeast of Melbourne.

- LVR of 70% measured against the purchase price of the property

- Interest Rate of 8.00% per annum to investors, net of a 0.75% per annum Peer Estate management fee, paid monthly in arrears.

- An Interest reserve of $4,600 (equivalent to approximately one months’ interest commitments) to be held for the term of the Loan.

PROPERTY

This Peer Estate Facility will be secured by a first registered mortgage over the subject property located at 69-73 Riesling Street, Corowa NSW 2646.

The subject property is situated in the Corowa town centre. Corowa is a NSW Riverina rural centre located approximately 611 kms south west of Sydney and approximately 300 kms north east of Melbourne.

The security property represents a site of approximately 2,839 square meters and comprises a former motel (of c.1960s construction) with 25 motel units, residence, laundry and storeroom across four main buildings. There is also an inground swimming pool, games room, garden area and car parking.

Whilst historically utilised as an owner operated motel, the property will upon settlement of the purchase be let by the Borrower to 3rd party tenant (being a registered charity and which derives part of its income from the government) who will operate it as a facility to provide a range of short-term accommodation options for people who are at risk of homelessness, require support and respite from crises or general disability respite.

A copy of the fully executed lease is held confirming the lease commences upon settlement of the purchase of the property by the Borrower.

An independent valuation was completed on 24 August 2021 under instruction from Peer

Estate, with the valuer estimating the ‘subject to lease’ market value of the Property to be $2,150,000 exclusive of GST. Peer Estate have however used the purchase price of the property ($900,000) in calculating the LVR of 70% given the lease is only new and accordingly the subject to lease value highly theoretical and uncertain.

 

SPONSOR AND BACKGROUND

The borrower is a new Special Purpose Vehicle (SPV) established by the sponsor to acquire the security property.

The sponsor is a businessman with interests in a number of different ventures including;

  • consultancy services in relation to property developments 
  • a child care centre which is tenanted by an established 3rd party operator on a long-term lease.
  • operating a restaurant from leased premises (this is run on a day-to day basis by the sponsor’s children).
  • operating a Mobil branded service station and truck stop from a leased premises.

An unlimited guarantee and indemnity is being provided by the sponsor personally (n.b. no guarantee is provided by the sponsor’s other corporate entities)

Capital Structure Stack

  • 30.0%
    Equity $270,000.00
  • 70.0%
    Senior Debt $630,000.00

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 24 August 2021 under instruction from Peer

Estate, with the valuer estimating the ‘subject to lease’ market value of the Property to be $2,150,000 exclusive of GST. This would correspond to an LVR of 29.30% however for sake of conservatism given the lease is only new Peer Estate considers it appropriate to measure the LVR at 70% based on purchase price of the property.

The property is centrally located within town with the valuer noting a selling period of approx. 6 months.

 

Interest Servicing Risk

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

Mitigants

The property will be tenanted pursuant to a lease of 5 years (with a further 5-year option) the contractual rental income from same being more than sufficient for the borrower to service the monthly interest commitments on this Peer Estate loan.

Peer Estate will additionally hold an interest reserve equivalent to one month’s interest commitments.

 

Exit Risk

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

Mitigant

The sponsor is expecting to be able to refinance to a bank by the end of the 12month loan term once the tenancy arrangement has a demonstrated track record.

Alternative exits would rely on a refinance to another non-bank lender, or a sale of the property. 

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