Peer Estate is making available to you a first mortgage investment opportunity secured by vacant land located in George Town, Tasmania.
A commercial investment loan facility of $415,000 (the ‘Facility’) is to be provided and at settlement:
This provides for an effective Loan (net of cash held as security by Peer Estate) to Value Ratio (LVR) of 50% against the ‘as is’ market value of the property/ies.
The proposed Peer Estate loan will provide time for the Borrower to seek Development Approval (“DA”) to subdivide Property One into 119 individual lots. If the Borrower is successful in additionally purchasing the Road Reserve this will be consolidated with Property One. However, should the Borrower not be successful in purchasing the Road Reserve, this is not expected to preclude the proposed subdivision of Property One from proceeding.
The Facility will have a maximum term of 18 months.
All investor funds committed for investment in this Facility are required to be available as cleared funds in the Peer Estate Finance account by no later than close of business on Thursday 3rd June. Any committed amounts not received or not clear will lead to the investor allocation being cancelled and the investment being reopened for investment. This Facility is scheduled for settlement on Friday 4th June and interest earn on all investor funding will commence as of this date.
- First Registered Mortgage over the Property/ies
- Effective LVR of 50% (calculated on the total $415,000 Loan, net of the amount of cash security held by Peer Estate at any time)
- Interest Rate of 8.50% per annum to investors, net of a 1.25% per annum Peer Estate management fee, paid monthly in arrears.
- George Town is a town in north-east Tasmania, on the eastern bank of the mouth of the Tamar River, approximately 50km north of Launceston.
- Peer Estate will hold an interest reserve of $20,000 (equivalent to six months interest commitments) for the term of the Facility
George Town is a town in north-east Tasmania, on the eastern bank of the mouth of the Tamar River some 50 kilometres north of Launceston. It has a population of approx. 7,000
The Peer Estate loan will be secured by first registered mortgage/s over:
The location and layout of these properties is shown in the following 2 diagrams:
Property One comprises a residential zoned allotment of approximately 9.76 hectares while the Road Reserve comprises of approximately 1.04 hectares adjoining Property One along its eastern boundary.
The Road Reserve is the subject of a crown land purchase application. The Borrower has advised that they have an ‘in principle’ agreement with the Crown, to buy this Road Reserve (currently vacant and comprising remnant vegetation it was historically designated by the Local Government as part of its future road construction programme before this was subsequently aborted). The cost to acquire the Road Reserve is still to be agreed upon, however is expected to be $80,000 (with the Borrower hopeful of contracting such purchase shortly).
An independent valuation was completed on 17 April 2021 under instruction from Peer Estate, with the valuer estimating the ‘as is’ market value of Property One at $750,000 and the Road Reserve at $80,000 exclusive of GST.
SPONSOR AND BACKGROUND
The borrower is a new Special Purpose Vehicle (SPV) created to acquire the property/ies.
Sponsor one has a construction background with approximately 13 years’ experience and has also been involved in the finance sector. Sponsor two has a construction and subdivision background with approximately nineteen years’ experience in the industry. The sponsors have an equal shareholding in the Borrower.
An unlimited guarantee and indemnity is being provided by each of the sponsors personally.
Market Valuation Risk
The risk that the Property declines in value due to changes in market conditions or property specific factors. George Town is only a small town and additionally, a nearby aluminium smelter is a significant employer in the catchment (in the event this was in the future to be closed values of land and property in the area would likely be significantly affected).
Valuer advised that low levels of supply in the immediate surrounding areas would suggest sustained growth in underlying demand and therefore by extension, sale prices for properties in the area.
An independent valuation was completed on 17 April 2021 under instruction from Peer Estate, with the valuer estimating the ‘as is’ market value of Property one to $750,000 and property two to be $80,000 exclusive of GST.
Proposed LVR of 50% provides a buffer for valuation uncertainty noting the location and limited market evidence of comparable land sales in order to accurately estimate selling price in the event the property/ies were put back to market.
Interest Servicing Risk
The risk that the Borrower is unable to meet interest commitments on the Facility.
Noting the only small loan size and effective LVR of 50% Peer Estate was not provided with full detail on the sponsors other property interests (& associated debts).
Sponsors’ have significant property/construction related experience with satisfactory historical incomes.
Peer Estate will hold an interest reserve of $20,000 (equivalent to six months interest commitments) for the term of the Facility
The risk that the borrower is unable to repay the Facility at maturity
Assuming DA approval is received the sponsors plan to refinance to a construction financier for completion of the subdivision works.
However, if DA is not forthcoming then the sponsors will look to sell the property ‘as is’ or alternately may seek to refinance the loan to another private lender.
The Borrower is required to provide quarterly updates to Peer Estate on the status of the DA application (until such time as this is approved).
No questions have been asked.
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