Australian Unity’s debt business continues to evolve as the Group’s capability at raising and deploying capital into first mortgage investments grows. This growth is backed by an experienced team who can source and partner with strong borrowers underpinned by quality projects supported by the reputation and strength of the Australian Unity brand.
Launched in 2014, Australian Unity’s Select Income Fund is a ‘Contributory/Peer to Peer (P2P)’ structured mortgage scheme (as opposed to a ‘Pooled’ mortgage scheme), aimed at investors seeking direct exposure to investor selected mortgage loans.
The Fund currently has around $300m of drawn funds across 36 projects on the east coast of Australia, with a further $250m of undrawn funds.
The Groups’ latest offer to investors is a $62m facility to fund the refurbishment and leasing costs of an existing office tower in Albion QLD. The scheme will offer investors a 6.75% rate of return over a 22 month period with an LVR of 61%. Premium Members can read further below.
Australian Unity have observed a significant increase in competition in the non-bank lending space in recent years, pushing returns down from 8.0 – 8.5% p.a. in 2019/2020 to around 6.0 – 6.5% p.a. today.
Whilst the Group will not take excessive risks, Australian Unity constantly reviews its credit controls to meet with market changes. For example, allowing some projects to proceed with fewer pre-sales and/or offering lower interest rates to developers where risks are reduced via lower loan-to-value ratios or where greater security/collateral is pledged by the borrower.
In speaking about the key risks in the current market, Australian Unity’s Matthew Afflitto said “we are entering new territory with increasing costs in labour and materials together with disruptions to sequencing of work which is placing greater pressures on builder viabilities.”
Australian Unity scrutinise Builders and Developers to ensure that both are adequately capitalised and have not over extended themselves.
“Many projects that come across our desks these days do not pass through the initial round of scrutiny that we apply to borrowers and projects. This highlights the importance of having a prudent and experienced fund manager on your side when deploying capital into the current market”, said Mr Afflitto.
“Importantly all loans offered to investors have four layers of protection comprising: (1) an extensive due diligence process by Australian Unity ending in a Lending Committee approval; (2) a conservative Loan-to-Value position; (3) active and ongoing loan management; and (4) ultimately, registered first mortgage security”.
Matching projects and investors capital is always a balancing act for Mortgage funds and as a result Australian Unity is currently assessing options for a diversified, co-mingled fund which will focus on longer-term investor commitments that will enable investors to stay invested for a set period and achieve a smoother return profile over their investment horizon.
For more information on Australian Unity’s latest offering in Albion, QLD, complete the Investor Registration form.