Peer Estate is making available to you a first mortgage investment opportunity secured by a property located at 1 St Leon Street, Whitlam ACT 2611 (the ‘Property’).

A commercial investment loan facility of $1,040,000 (the ‘Facility’) will be provided at a Loan to Value Ratio (LVR) of 60% measured against the estimated ‘on completion’ market value of the property and with the Loan-to-total-development-cost ratio of 62.1%.

The proceeds of the Facility will refinance an existing $500,000 land loan and provide $540,000 funds to assist the construction of a two-storey dwelling on the security property.

The facility will be drawn in full at settlement (& interest will accrue on the full $1,040,000 loan) however Peer Estate will initially retain control of the $540,000 and will only progressively release same on a cost-to-complete basis (with a Quantity Surveyor appointed to inter-alia sign off on completion of works associated with each such release and adequacy of the remaining balance of funds to complete the construction).

The Facility will have a maximum term of 12 months.

Key Deal Points

- First Registered Mortgage over the Property.

- LVR of 60% measured against estimated ‘on-completion’ market value of the Property

- Interest Rate of 7.40% per annum to investors, net of a 1.00% per annum Peer Estate management fee, paid monthly in arrears.

- An Interest reserve of $18,000 (equivalent to approximately three months’ interest commitments) is to be held for the term of the Loan.

- The new suburb of Whitlam is approximately 15kms north-west of Central Canberra

PROPERTY

This Peer Estate Facility will be secured by a first registered mortgage over the subject Property (currently a vacant lot) located at 1 St Leon Street, Whitlam ACT 2611. It is a level, rectangular-shaped corner block of 592sqm. Situated 15km north-west of central Canberra in the Molonglo Valley, the security property is part of a new four-stage land release in the new suburb of Whitlam. The newly established suburb is expected to eventually comprise 2100 dwellings.

The Peer Estate loan Facility will refinance an existing $500,000 land loan (which was provided by Peer Estate in November 2021 as a bridging facility pending refinance to the now proposed construction facility) and provide $540,000 funds to assist the construction of a two-storey dwelling on the security property. The proceeds of the Facility will be fully drawn at settlement date and investors will receive interest on the full balance of $1,040,000 (notwithstanding Peer Estate will initially retain control of $540,000 of the proceeds and will only progressively release same on a cost-to-complete basis).

A luxury two-storey dwelling is to be constructed, to include 4 bedrooms, three ensuites, bathroom, entry, front porch, lounge, dining, study, kitchen, butlers pantry, family/meals, alfresco, powder room, double garage, and in-ground pool.

The dwelling is to be constructed on an owner builder basis (by a building company owned by the sponsors).  Although this is a related party, a formal building contract is in place for an amount of $1,050,000 including GST (n.b. note that works will be firstly funded by the Borrower prior to Peer Estate releasing any of the $540,000 on a cost-to-complete basis).

The current intention of the sponsors is to keep the property (once construction is complete) as a display home (ie. for marketing their building business).  Alternately they could consider renting it to a third party for passive income generation or selling it.

An independent valuation was completed on 29 September 2021 under instruction from Peer Estate, with the valuer estimating the ‘on completion’ market value of the Property to be $1,733,636 exclusive of GST.

 

SPONSOR AND BACKGROUND

The borrower is a Special Purpose Vehicle (SPV) established to acquire the Property in 2020.

The sponsors are a husband-and-wife team with the main sponsor being a licenced builder and a qualified carpenter who has over two decades of experience in the building industry in Canberra. He operates a construction business (established in 2006 and specialising in high-end residential homes) via two separate entities.  The sponsor is assisted by his wife with the management of trades, accounts, and bookkeeping.

A guarantee & indemnity in support of the Peer Estate loan is being provided by each of the two sponsors and the two entities through which the sponsor’s construction business is conducted.

Capital Structure Stack

  • 40.0%
    Equity $693,636.00
  • 60.0%
    Senior Debt $1,040,000.00

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 29 September 2021, under instruction from Peer Estate, with the valuer estimating the ‘on completion’ market value of the Property to be $1,733,636 exclusive of GST.

An LVR of 60% on the estimated “on completion” value of the Security Property provides an acceptable buffer against valuation uncertainty.

 

Interest Servicing Risk

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

Mitigants

The sponsor has an established operating business whose profitability and cash flow generation is assessed as being sufficient to service monthly interest on the new Peer Estate loan.

Additionally, Peer Estate will hold an interest reserve equivalent to three months interest commitments.

 

Exit Risk

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

Mitigant

The sponsors currently intend to keep the Property (once construction has completed) for use as a display house, repayment of the Peer Estate loan relies on a refinance to another lender, once construction has been completed.

An alternative exit would rely on a sale of the security property ‘as is’ or upon completion of the build.  The sponsor also has other unrelated real estate assets which could be sold separately if required.

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