Peer Estate is currently seeking expressions of interest for investment in an opportunity secured by a mix of rural cherry and apple orchards, homestead, packing facilities and other farm related infrastructure, residential properties, farm machinery and equipment located in the Orange NSW tablelands region. Full details of each individual security are provided later herein.

A commercial investment loan facility of $4,893,418 (the 'Facility') at an overall Loan to Value Ratio ('LVR') of 66% will be provided against the securities. The proceeds of the Facility will be utilised to purchase the secured properties in settlement of obligations between related parties being administered through a voluntary administration process and to fund the fees and costs associated with the transaction.

The approximate Sources and Uses:

The Facility will have a term of 6 months. The Facility is expected to be repaid via a refinance from the Borrower’s incumbent bank which has proposed funding terms upon the settlement of all obligations and the consolidation of the ownership of the securities expected to occur over the 6-month Facility term period.
Note: “Sponsors’ equity” represents the existing portions of equity held by the Sponsors/Purchasers within the Properties of which they are effectively purchasing the balance of equity portions in this transaction owed to the exiting brother. As such, the existing equity of the Sponsors represents an offset to the total gross purchase price of the Properties and is listed as here as a non-cash source.

The Facility will be advanced at the lower of the loan amount noted above and an overall LVR of 66% of the combined market value of the four farm operating properties including water rights; the current market value of the two rural residential investment properties (one located in Victoria); and the current forced-liquidation value of existing farming equipment.

The overall LVR will be required to be reduced to 55% by the third month projected to be repaid by the following:

 

  • Expected GST Recovery                                                                       $285,000
  • Sponsor loan claim in the administration                                      $800,000
  • Recovery of parents’ personal loan to the business claim       $323,400

 

These projected post-settlement funds totaling $1,400,000 would be sufficient to repay the Facility by the estimated $1,000,000 required to reduce the Facility to a 55% LVR. Additionally, the net profits from the current harvest sales of cherries and apples is to be collected over this period and available as required.

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 Wednesday 4th December. 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 6th December and interest earn on all investor funding will commence as of this date.

 

Key Deal Points

  • First Registered Mortgage over security properties and First Registered PPSA security interest over the specific machinery and equipment.
  • Overall LVR of 66% at drawdown with a reduction to 55% within the third month from funding.
  • Interest Rate of 13.00% net per annum to investors, net of a 1.95% per annum Peer Estate management fee, paid monthly in arrears.
  • A six-month term with a minimum earn of three months.
  • Peer Estate will hold an interest reserve of $123,000 for the term of the Facility.
  • The main farm operating properties are situated in Orange NSW, approximately three hours west of Sydney.

PROPERTY

The new Peer Estate facility will be secured by first registered mortgage over four (4) farm operating securities, two (2) residential properties and farming machinery and equipment.

Properties 1- 4 (farm operating properties) are located near Orange being a regional city with a population of about 40,000, situated some 265 kilometres west of Sydney toward the western fringe of the Central Tablelands district of New South Wales. Orange acts as a major commercial servicing area for central and western New South Wales with a diverse industry base, ranging from horticulture/viticulture and tourism through to mining.

 

Property 1

“Melrose Orchard” 253 Nancarrow Lane, Nashdale NSW 2800:

Approximately 10km from Orange NSW - The 50.6ha farming property including 38ha of apple orchard is located on the eastern side of Nancarrow Lane approximately 12 kilometres west of Orange CBD.

Improvements include a circa 1980’s detached single storey dwelling with four (4) bedrooms, two (2) bathrooms, a double garage and double carport. Another circa 1950’s detached single storey dwelling with three (3) bedrooms one (1) bathroom utilised as a workers cottage and a further circa 1900’s detached single storey dwelling with two (2) bedrooms and one (1) bathroom workers cottage. The property also has various rainwater tanks, a machinery shed, a packing shed and cool rooms. 

An independent valuation was completed on 19th November 2019 under instruction from Peer Estate within which the valuer confirms the market value of this property to be $2,300,000 plus water rights of $40,000.

 

Property 2          

Valley View” 305 Nancarrow Lane, Nashdale NSW 2800:

The subject property, located on the eastern side of Nancarrow Lane approximately 13 kilometres south west of Orange town centre, comprises a rural lifestyle allotment of approximately 1.155 hectares. The land has an easterly aspect and is gently undulating.

Improvements include a circa 1970’s detached single storey dwelling with three (3) bedrooms and one (1) bathroom used as a workers cottage. A circa 1950’s metal packing shed with cool rooms and office facilities as well as separate machinery shed.

An independent valuation was completed on 19th November 2019 under instruction from Peer Estate within which the valuer confirms the market value of this property to be $650,000.

 

Property 3          

“Packing Shed” 474 Canobolas Road, Canobolas NSW 2800

The subject property, located on the western side of Canobolas Road approximately 8 kilometres south west of Orange town centre, comprises a rural allotment of approximately 3 hectares.

Improvements include a circa 1975 large packing shed with four (4) cool rooms, mezzanine and office facilities. Ancillary improvements include a gravel sealed hardstand and outdoor area as well as a circa 1940’s single storey detached masonry office building.

An independent valuation was completed on 18th November 2019 under instruction from Peer Estate within which the valuer confirms the market value of this property to be $1,100,000.

 

Property 4          

“Caernarvon Orchard/Homestead” 474 Canobolas Road, Orange NSW 2800

The subject property, located on the western side of Canobolas Road approximately 8 kilometres south west of Orange town centre, comprises a rural allotment of approximately 37.17 hectares.

Improvements include a circa 1910 rendered Brick and Colourbond dwelling. This dwelling has had an extension added in 2015 and features four (4) bedrooms, two (2) bathrooms with detached garage, tennis court and stables with tack room. Ancillary improvements include a sealed driveway, established landscaping, carport and sheds. Furthermore, there is a dance hall with an added amenities block containing male and female toilets.

An independent valuation was completed on 18th November 2019 under instruction from Peer Estate within which the valuer confirms the market value of this property to be $2,400,000 plus water rights of $36,000.

 

Property 5

4 Fisher St, Parkes NSW 2870

Located about 110 km from Orange NSW, Parkes is the home of the CSIRO telescope and other government entities. The subject property is a residential home situated on the western side of Fisher Street approximately 1.5km south east of Parkes CBD.

Improvements include a circa 1960’s detached single storey dwelling with three (3) bedrooms and one (1) bathroom across a total living area of approximately 82 sqm.

An independent valuation was completed on 20th November 2019 under instruction from Peer Estate within which the valuer confirms the market value of this property to be $145,000.

 

Property 6

118 Anderson St, Warracknabeal VIC 3393

Located on the banks of the Yarriambiack Creek, 330 km north-west of Melbourne, the subject property is situated approximately 1.4 kilometres south-west of the Warracknabeal post office in an established residential area.

Improvements include a circa 1940’s detached single storey dwelling with four (4) bedrooms and one (1) bathroom across a total living area of approximately 141 sqm.

An independent valuation was completed on 15th November 2019 under instruction from Peer Estate within which the valuer confirms the market value of this property to be $100,000.

 

Equipment Security Valuation

133 pieces of machinery and farming equipment of various ages and conditions, with all equipment viewed being operational and in good working order. Valuer noted the market for such equipment would be good within the general vicinity of the equipment (properties 1 and 2) noting many local farms and fruit growers in the area.  The Valuer noted two pieces of equipment were under lease at the time, however, the leases have since been paid in full and currently all equipment is unencumbered. 

An independent valuation was completed on 22nd November 2019 under instruction from Peer Estate within which the valuer confirms the forced liquidation value of the assets to be $644,950 (excluding GST).

 

SPONSOR AND BACKGROUND

The main sponsors family have been growing world-class produce in the Central Tablelands district in Orange City Council, at the foot of Mt Canobolas for over 40 years. Their packaging operations are based in Orange NSW, from where they also market fruit from other premium local producers under their brand name. Produce from the sponsors operation can be found in major retailers and supermarkets (including through direct relationships with Woolworths and Harris Farms) both domestically and internationally.

The business has always been family owned and successfully operated by the parents and later their sons and respective families. Upon their retirement, the parents passed down a portion of the assets and operations of their business jointly to their two sons. The business has been consistently profitable and is currently enjoying a successful cherry and apple harvest as volumes harvested have been good and prices strong due to reduced harvests experienced in other regions.

Unfortunately, a dispute between the two brothers over the timing for the desired payout of one of the brother’s share of the assets and operations resulted in the appointment of an administrator/liquidator to oversee a market sale of the securities at issue and settlement of all claims of the brothers and the parents.

The proposed Facility allows for the immediate settlement of the sale of the securities at issue and allows time for the administrator to then process and settle the remaining claims between the parties out of the sale proceeds expected to occur within three months of funding. Upon settlement of all disputes, the families former bank will then be able to begin their process to re-establish funding lines to repay the Facility and provide ongoing banking facilities to the newly restructured orchard operations.

The main sponsor of this transaction is a second-generation orchardist, who currently looks after the day to day management of the orchards, and the picking and packaging operations. He is accompanied by his wife who looks after marketing and branding. His wife has also been a past president of the NSW Cherry Growers Association and is a current committee member.

Capital Structure Stack

  • 34.0%
    Equity $2,522,532.00
  • 66.0%
    Senior Debt $4,893,418.00

RISKS

Interest Servicing Risk

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

Mitigant

Peer Estate will hold an interest reserve facility of $123,000 (approximately 2 months interest) for the term of the facility.

Peer Estate has completed its standard due diligence to assess the sponsors ability to meet their servicing obligations noting the upcoming cherry harvest and cash flow activities over the first few months of the loan 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 another lender (expected to be the sponsor’s incumbent bank) who have proposed funding terms however a new facility is dependent upon the settlement of the administration and full release of all security assets by the outgoing brother.

Within three (3) months of settlement, the overall LVR of the facility is to be reduced to 55% against the security properties and equipment combined. This reduced LVR is considered an acceptable level for a traditional incoming lender taking into account the nature and location of the security assets.

The Borrower is required to provide Peer Estate with particular details of the Facility refinance at or before 4 months from loan drawdown. This will include milestone dates and evidence of agreements with the incoming lender as required.

Project Questions

No questions have been asked.

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