Peer Estate is making available to you a first registered mortgage investment opportunity secured by a commercial property located at 38 Walker Street, Maryborough QLD, 4650 (the ‘Property’). The property is a long-established Tyres Plus business with 5 fuel bowsers selling LPG, Diesel and Unleaded petrol. 

A commercial investment loan facility of $589,000 (the 'Facility') at a Loan to Value Ratio ('LVR') of 62% will be provided against the Property. The proceeds of the Facility will be utilised to settle the purchase of the Freehold Property and payment of stamp duty and other financial transaction costs.

Borrower and proposed owner of the Property, a recently incorporated Special Purpose Vehicle (‘SPV’), is also purchasing the associated Auto Tyre Workshop and service station business attached to the property as a going concern under a separate contract of sale.

The facility will have a maximum term of 12 months with a 9-month minimum earn. As this is a Bridging Facility, the Borrower is required to arrange a refinance of the loan facility with another commercial lender within 12 months of settlement.

Key Deal Points

  • First Registered Mortgage security
  • LVR of 62%
  • Interest Rate of 8.50% net per annum to investors, paid monthly in arrears
  • Interest Reserve held for 3 months
  • Property comprises a well-established business which has been operating for 40 years
  • The property is located in close proximity of the Bruce Highway connecting to Brisbane with Walker Street being the main thoroughfare between the Highway and the Fraser Coast.

PROPERTY

Maryborough is a suburb in the Fraser Coast Region of Queensland. It is located, approximately 255 kilometres north of Brisbane. The city is served by the Bruce Highway. It is closely tied to its neighbour city Hervey Bay which is approximately 30 kilometres northeast and together they form part of the area known as the Fraser Coast.

An independent valuation was completed on the 8th of January 2019 under instruction from Peer Estate by Egan National Valuers. There is a single storey brick building located on the central western portion of the site used as an office and product display area. The site is currently used as a tyre retailer and service station and has been utilised like this for the past 47 years.

The subject property comprises a corner block totalling approximately 1,735 square metres and currently houses a Tyre repair and service centre with a number of fuel bowsers. It contains three underground storage tanks (‘UST’) towards the southwest corner of the site made up of one 10,000-litre diesel UST, one 10,000-litre unleaded petrol UST and one 5,000-litre premium unleaded UST. The valuer has noted that there is an unused 5,000-kilogram LPG UST on the northeast corner of the site and a 400-litre kerosene above ground storage tank in the same area.

The valuer makes further reference to research into the subject property, which confirms that the highest and best use for the property is as a service station development site opposed to its current use as a vehicle repair and service station.

Following settlement, the borrower will apply for the necessary planning permit approvals to allow them to expand the ongoing operations of the Service Station by adding a grocery and everyday convenience store / Café and Restaurant, expand trading hours and adding more fuel pumps, vehicle canopy and increased underground tanks. There is excess surplus land at the subject security property to allow for the proposed extensions. The Peer Estate Facility is not being utilised to fund any of the proposed works.

The Borrower is also currently negotiating a Heads of Agreement with Westside Petroleum Holdings Pty Ltd for a lease to operate the service station business and grocery/convenience/café store once the works noted above have been completed by the borrower.

 

SPONSORS

The Borrower and proposed owner of the Property, a recently incorporated SPV, has purchased both the freehold and the operating business. The borrower intends to continue trading the “Casey’s Tyre Service” business from the premises under the existing Tyre Plus Franchise Agreement with the operations to be managed by the current owner’s son (who has been employed by the business since 1986).

The sponsors are a married couple who are both tertiary qualified and have stable PAYG incomes. The male sponsor has experience in the operation of service station businesses from his employment with Mobil over a number of years and within his current role as a Finance and Operations manager for another Petrol Station/Roadhouse Operator known to Peer Estate.

Both sponsors propose to continue with their current PAYG employment during the course of the Peer Estate Facility.

Capital Structure Stack

  • 38.0%
    Equity $361,000.00
  • 62.0%
    Senior Debt $589,000.00

RISKS

Valuation Risk

The risk that the asset is specialised given that it is a service station

Mitigant

The property is located in close proximity of the Bruce Highway and is on the main thoroughfare from the highway to the Fraser Coast. The property currently houses a long-established tyre repair and service centre business which has been operating profitably. The sponsor plans to complete refurbishment works to the property (subject to planning permit) and is negotiating a Heads of Agreement with Westside Petroleum.

A conservative LVR of 62% provides a buffer against adverse market conditions affecting the specialised nature of the property. The saleability period as advised by the valuer has been assessed as being in the order of 6 months.

 

Environmental Risk

The risk that the security is a Tyre Replacement Centre and Service Station and as such restricts the use of the land

Mitigant

The valuation report confirms there were no signs of contamination nor any other matters raised that were detrimental to the lender's secured position with regards to the property.

The Tyre Replacement Centre and Service Station business has been successfully operated for over 40 years whilst remaining compliant to local zoning guidelines. A report commissioned by the current owners in June 2018 also confirmed the site safe for its current use as a Tyre repair workshop and service station.

The sponsors intended use for the property is to operate the Tyre Centre and Service Station business with a view to renovate and expand the service station as well as extend the hours of operation hence not dissimilar to its current use.

 

Interest Servicing Risk

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

Mitigant

In addition to the cash flow generated by the trading business there is also sufficient income generated from the sponsors PAYG income to meet the obligations under the facility in the short to medium term.

Peer Estate holds a three (3) month interest reserve with a set-off deed in place to apply this to interest payments if required.

 

Exit Risk

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

Mitigant

The Borrower is to refinance with a commercial lender at the maturity of the Facility. Peer Estate have asked that the borrower provide regular updates as to the progress of obtaining unconditional approval for this refinance after nine months from loan settlement.

The Borrower could sell the subject property.

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