Peer Estate is making available to you a first mortgage investment opportunity secured by a property located at Hawke Street, West Melbourne Vic 3003 (the ‘Property’).

A commercial investment loan facility of $1,500,000 (the ‘Facility’) will be provided at a Loan to Value Ratio (LVR) of 26.79% measured against the market value of the Property.

The proceeds of the Facility will be utilised primarily to refinance two maturing loans from the sponsor’s main bank totalling $754,000. The balance of the Facility is to be used to clear some property related expenses, fund costs and prepaid interest for the Facility and provide working capital to support the sponsor’s trading business whilst it recovers from the disruption resulting from COVID during 2020 & 2021.

The Facility will have a maximum term of 24 months.

Key Deal Points

- First Registered Mortgage over the Property.

- The subject property is located within the suburb of West Melbourne, situated approximately 1.3 kilometres north-west of the Melbourne CBD.

- LVR of 26.79% measured against the current market value of the property

- Interest Rate of 6.45% per annum to investors, net of a 0.50% per annum Peer Estate management fee, paid monthly in arrears.

- Interest for the full 24-month term of the facility to be prepaid.

PROPERTY

This Peer Estate Facility will be secured by a first registered mortgage over the subject property being a 1,736 m2 site located at Hawke Street, West Melbourne Vic 3003, approximately 1.3 kms north-west of the Melbourne CBD.

The property comprises a 1970’s built three-storey 3-star hotel including reception, waiting room, commercial kitchen, dining room, café, multiple communal kitchens and laundries and 70 rooms of varying configuration and size each with an ensuite and built-in robe and of uniform standard throughout. There is a secure car park, with 15 spaces.

Against the backdrop of the COVID-19 pandemic, trading of the hotel has been challenged due to a prolonged period of low occupancy. While the hotel has remained open throughout the COVID-19 pandemic, occupancy rates dropped from approximately 92% (pre Covid-19 lockdowns) to an occupancy rate of only 5% since March 2020.

In addition to the Property (being the hotel) the sponsor (directly & indirectly) owns a number of adjoining properties which are collectively earmarked for a future redevelopment. The sponsor intends to (within the next 2 years) lodge a development application (“DA”) with the local council for the demolition of the existing hotel and the adjoining properties, to facilitate the construction of a new hotel (95 rooms), two residential apartments, a day spa and food & drink premises.

An independent valuation was completed on 15 October 2021 under instruction from Peer Estate, with the valuer estimating the current market value of the Property to be $5,600,000 exclusive of GST.

 

SPONSOR AND BACKGROUND

The sponsor owns and controls the two companies which:

i) own the Property (being the hotel) and

ii) operate the hotel (ie. the trading business)

In addition to the first mortgage over the Property, Peer Estate will additionally hold General Security Agreements given by these two companies.

No guarantee and indemnity is being provided by the sponsor personally however Peer Estate is comfortable with this given interest is to be prepaid and LVR is low.

In addition to the Property (being the hotel) the sponsor (directly & indirectly) owns a number of adjoining properties, certain of which are encumbered in support of other facilities provided by the sponsors main bank.

Capital Structure Stack

  • 73.2%
    Equity $4,100,000.00
  • 26.8%
    Senior Debt $1,500,000.00

RISKS

Market Valuation Risk

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

Mitigant

An independent valuation was completed on 15 October 2021 under instruction from Peer Estate, with the valuer estimating the current market value of the Property to be $5,600,000 exclusive of GST. This corresponds to a very conservative LVR of 26.79%.

The property is close to the CBD with the valuer commenting that the good frontage, high exposure and high vehicular traffic are valuable strengths.  The valuation considers the Property a future development site (valued for the site area rather than its current improvements)

 

Interest Servicing Risk

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

Mitigants

Interest on this Peer Estate loan is to be prepaid for the full 24-month term of the loan.

 

Exit Risk

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

Mitigant

The Peer Estate exit in 24 months is expected to come from:

  1. Refinance back to a bank (upon cashflows of the hotel improving and returning to pre-Covid-19 levels) or;
  2. A sale, by the sponsor of the consolidated site (assuming the proposed DA is approved) or;
  3. Refinance to a construction facility to redevelop the consolidated site (assuming the proposed DA is approved).

The low LVR of 26.79% provides for a comfortable exit in the unlikely event Peer Estate needed to enforce the loan and sell the property.

Project Questions

No questions have been asked.

Ask a question

Got a question that wasn't answered above? We're always happy to help, simply sign in to your account to ask a question now.

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