Australian Unity’s Debt Platform Continues to Evolve

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%.

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.

Fund Overview – Albion, QLD, 4010

Fund overview 

Australian Unity are raising funds for a $61.98m Loan Facility for the refinancing of the current land facility and funding of the refurbishment costs, leasing incentives and other development costs of the existing office tower arranged over basement, lower ground, and nine upper levels at the Security Property located in Albion QLD, located less than 5km NNE of the Brisbane CBD.

The refurbished office tower will result in an increased NLA of 9,693sqm (currently 7,322sqm), and a total of 192 car spaces. The Security Property has a total site area of 11,345sqm.

The loan is for a period of 22 months after which it is anticipated that the Borrower will repay the facility via:

1. a full sale of the Security Property upon building completion and lease up; or
2. refinance of the Security Property with a major bank upon building completion and lease up

Fund strategy

To provide regular income and capital stability, through a selection of investments into first registered mortgage loans (‘Syndicate-Funds’) with a short duration.

Fund Fees

Australian Unity charge fees for the facility to the Borrower, not to the Investor. These fees generally include;

• an Upfront Establishment Fee of 1%- 1.5%
• a Management Fee of 1% – 1.5% payable monthly
• default fees where applicable

Recommendation

We support the investment strategy and recommend the Fund for further consideration by investors seeking an average distribution yield from property underpinned by real estate and secured by registered first mortgages.

_{Disclaimer: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.}