Peer Estate is making available to you a first registered mortgage investment opportunity secured by an industrial property located at 157 – 161 William Street, Granville NSW, 2142 (the ‘Property’). The property is a regular shaped parcel of land, with a site area of 1,966.6 sqm, comprising three lots with hardstand and a dwelling.

A commercial investment loan facility of $2,475,000 (the 'Facility') at a Loan to Value Ratio ('LVR') of 75% will be provided against the Property. The proceeds of the Facility will be utilised to refinance an existing private lender facility.

The facility will have a term of 12 months. The facility is expected to be repaid from the proceeds of the sale of four townhouses in another development project (14 Fontainebleau Street, Sans Souci 2219), unrelated to the Property securing the Facility. The Facility is thus effectively a bridging facility pending the sponsor securing such sales.

The completion and marketing of these townhouses is imminent and the sponsor is required to inform Peer Estate of the sale of each townhouse (upon signing of each Contract of Sale) and 100% of the net settlement proceeds of the sale of each of these townhouses are to be applied (firstly) to reducing the loan provided by the (Sans Souci) first mortgage holder and (secondly) the loan from Peer Estate (secured by first mortgage over the Granville property). We may consider and require a lesser % of net sale proceeds be applied to debt reduction once the LVR of the Peer Estate loan is below 60%.

Key Deal Points

  • First Registered Mortgage security
  • LVR of 75%
  • Interest Rate of 8.50% net per annum to investors, net of a 1.25% per annum Peer Estate management fee, paid monthly in arrears
  • At inception of the loan, Peer Estate will receive 6 months prepaid Interest and this is to be replenished by the borrower every 3 months for the duration of the facility
  • The property comprises a 1,966.6 sqm site currently leased for a three (3) year period with a further three (3) year option
  • The property is located in close proximity to Parramatta Road, approximately 23km from the Sydney CBD

PROPERTY

Granville is a suburb approximately 23 kilometres west of the Sydney CBD. The surrounding development includes fringe commercial, medium-density mixed uses and single residential uses fronting Woodville Road with low-density residential uses fronting William Street. The Granville commercial centre and railway station are located approximately 1.2 kilometres east of the subject property.

An independent valuation was completed on the 8th of August 2019 under instruction from Peer Estate. The valuer confirms that the subject property is a corner parcel having three lots and is located approximately 2.5 kilometres south of Parramatta Road with frontage to both Woodville Road and William Street. There is currently a dwelling which is in the process of being renovated. This dwelling has not been included in the calculations for the valuation used by Peer Estate.

The property was purchased in September 2016 for $3.76 million with development approval ('DA’) for a 39-room boarding house. The sponsors have advised that they are not interested in the DA as they believe it detracts from the property’s ultimate value. The property comprises 3 lots and the sponsors intend to apply for the rezoning of the two residential lots to mirror the same B1 Neighbourhood Centre zoning of the third lot. If successful, this will be followed by a development application for a mixed-use project, which the sponsor feels is the best use of the subject property.

The property is currently leased to a building business that is using the property for storage of materials, plant and equipment, excavation vehicles and trucks. The current lease commenced in September 2018 and has a three-year term with a further three-year option period. The valuer has confirmed that the rental income is consistent with current market levels.

 

SPONSORS

The main sponsor was born and raised in Vietnam and came to Australia in the mid-2000s, where he is now a permanent resident. Since the age of 18, he has been active in his family’s residential property developments in Vietnam and has extended these activities to Australia where he has reportedly completed and sold a prestige waterfront residence in Blakehurst and a 10-room boarding house in the Sydney CBD.

He is a few months away from completing his third project, a prestige 4 townhouse development at Sans Souci. We understand that the sponsor comes from a wealthy family in Vietnam with a variety of business interests.

The sponsor is also assisted by his wife in an administrative capacity and she is also a director of the borrower entity.

Capital Structure Stack

  • 25.0%
    Equity $825,000.00
  • 75.0%
    Senior Debt $2,475,000.00

RISKS

 

Valuation Risk

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

 

Mitigant

An independent valuation of the security Property (Granville) was completed on 8th August 2019 under instruction from Peer Estate. This valuation was completed on an “As is” basis without consideration of the existing DA and exclusive of GST.

The proposed facility is being provided as a bridge to the sale of the townhouses in the Sans Souci development. Although another lender holds the mortgage over these, Peer Estate will have a second ranking General Security Agreement given by the entity which owns these townhouses.

The saleability period for the Property (Granville) securing the Facility, has been assessed by the valuer as being in the order of 6 months. Forced Sale scenarios have been considered and Peer Estate considers that there is capacity for the proposed loan to be repaid under such scenarios, should they occur.

 

Interest Servicing Risk

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

 

Mitigant

Peer Estate will hold pre-paid interest for the first six (6) months of the facility at drawdown. This pre-paid interest facility will then be replenished every three months by a sum equal to 3 months prepaid interest.

 

 

Exit Risk

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

 

Mitigant

The facility is expected to be repaid during the term of the facility, from the proceeds of the sale of four townhouses in the sponsors separate Sans Souci development. At or before three months from the drawdown of the Peer Estate Facility the borrower is to have contracted and/or sold at least 2 of the townhouses in this development.

The Borrower is required to provide Peer Estate with details of sales achieved in respect to the Sans Souci development and/or full details of the marketing programme for the sales of any of the 4 townhouses which are yet to be sold. This is required to evidence a clear strategy to repay the Peer Estate loan prior to maturity and otherwise be satisfactory to Peer Estate in all respects.

Upon settlement of the said townhouses 100% of the net sale proceeds are to be applied (firstly) to reducing the loan provided by the first mortgage holder and (secondly) the loan from Peer Estate (as mentioned earlier we may consider and require a lesser % of net sale proceeds be applied to debt reduction once the LVR of the Peer Estate loan is below 60%).

In the event that the sales of the Sans Souci townhouses fall below expectations, Peer Estate will have the ability to force a sale of the security Property (Granville).

Project Questions

No questions have been asked.

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