Peer Estate is making available to you a first registered mortgage investment opportunity secured by a property located at 586 Port Hacking Road, Lilli Pilli NSW, 2229 (the ‘Property’).

A commercial investment loan facility of $2,000,000 (the 'Facility') at an overall Loan to Value Ratio ('LVR') of:

  • 57% calculated against the value of the property and of the trading business conducted from the property; or
  • 79% calculated against the value of the property only.

The proceeds of the Facility will be utilised primarily, to consolidate existing debt (including debt held in the sponsors’ personal names) and to repay monies the sponsors borrowed from their parents which assisted in funding the earlier redevelopment of the property & establishment of the trading business.

The facility will have a maximum term of 18 months.

Key Deal Points

  • First Registered Mortgage over security property and a first ranking charge over the operating business conducted from the property
  • LVR of 57% including the value of the trading business conducted from the property (or 79% calculated against the value of the property only)
  • Interest Rate of 7.00% net per annum to investors, net of a 0.75% per annum Peer Estate management fee, paid monthly in arrears.
  • Minimum earn of nine months.
  • Peer Estate will hold an interest reserve of $38,750 (equivalent to roughly 3 months interest) for the term of the Facility.
  • The security property is located approximately 27kms south of Sydney.

PROPERTY

This Peer Estate Facility will be secured by first registered mortgage over a 37-place childcare centre. The irregular-shaped allotment of 784 square metres is positioned on the northern side of Port Hacking Road within the suburb of Lilli Pilli, a small and prestigious suburb, in the Sutherland Shire approximately 27kms south of Sydney.

The subject site is in close proximity to the Lilli Pilli oval, the Lilli Pilli Public school, the Caringbah South School and is directly opposite the neighbourhood village centre which includes an IGA supermarket, a café and other retail outlets.

The borrower, a trust owned by the sponsors, purchased the subject property (originally a large residential property) and redeveloped the building converting it into a custom-built childcare centre with modern and functional spaces for the supervision and care of children aged between six weeks and six years. The property is leased to the childcare centre operator, a corporate entity also owned and operated by our sponsors.

The childcare centre which markets itself as a boutique Early Learning Centre commenced trading in October 2018 and currently has an occupancy rate of c. 95% with a waiting list.

An independent valuation was completed on 9th January 2020 under instruction from Peer Estate within which the valuer has provided two estimates. The valuer estimates the ‘real estate only’ value (land and building with rental income) at $2,525,000 and further estimates the market value of the property together with the current business at $3,500,000.

 

 SPONSOR AND BACKGROUND

The Sponsors are a husband and wife team who have a background in childcare, having previously started and operated a childcare business in Shell Cove, NSW, which was on a leasehold basis only. This was a 40-place childcare centre which they opened in 2010 and later sold in November 2016 to the current operator.

The male sponsor has a Bachelor of Science (Environmental Management) and currently works full time with the local City Council. He also attends to the administration and book-keeping of the childcare centre after work hours.

The female sponsor holds a Bachelor of Teaching (Early Childhood Education) and has been working with children for over 20 years.

Capital Structure Stack

  • 42.9%
    Equity $1,500,000.00
  • 57.1%
    Senior Debt $2,000,000.00

RISKS

Valuation Risk

Risk exists in the asset being specialised ie. as a childcare centre.

Mitigant

The subject property is modern and is situated in close proximity to the neighbourhood village centre which includes coffee shops and retail amenities, and it has good street visibility from Port Hacking Road, considered desirable should a sale of the property be required.

While the Security Property is considered to be specialised and LVR is 79% on “real estate only” basis, this risk is moderated when we consider that the LVR drops to a more modest 57% when we include both real estate as well as the childcare business itself in the consideration of value.

 

Interest Servicing Risk

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

Mitigant

Peer Estate has completed its standard due diligence to assess the borrower’s ability to meet its servicing obligations noting the childcare centre is now stably occupied and cash generative.

Furthermore, Peer Estate will hold an interest reserve of $38,750 (roughly 3 months interest) for the term of the facility.

 

Exit Risk

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

Mitigant

The Facility is expected to be repaid via a refinance to a traditional ‘bank’ lender once further trading history is demonstrated.

The security property &/or the childcare business could also be sold as an alternative means of repayment.

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