The purpose of the capital raising undertaken through this Campaign is to secure $1,000,000 from Investors to provide re-financing of a loan fund in conjunction with a first registered mortgage over 54 Watts Road, Kemps Creek NSW 2178. This property is located in Badgerys Creek area that has been determined as the area for the 2nd airport in Sydney. This area will be developed both from a commercial and residential area.
If the capital raising for the Loan Sub-Fund is unsuccessful, or not all of the investors with an Active Bid accept the offer under this SPDS, or the borrower no longer needs the loan, the Loan Sub-Fund will not be created, and an Investor’s Quarantined Funds will be released after expenses (if applicable) are deducted. An investment in this Loan Sub-Fund will not provide exposure to any other investment in the DomaCom Fund or any of its other sub-funds.
Key Information for Landbanking Investment
|Minimum Investment amount||$100,000|
|Maximum amount to be raised||$1,000,000|
|Investment term||6 months from May 2020|
|Target return to investors||9.56% p.a. fixed for the term of the loan. This is the net return that investors will receive after fees|
|Income distributions||Paid monthly in arrears within 10 days of the month end|
|Underlying loan details|
|Underlying loan amount||$1,000,000|
|Underlying loan interest rate||10% p.a. Fixed for the term of the loan, interest only loan. This represents the interest rate that the Borrower will pay. This will be paid from the Property Sub-Fund DMC0167AU. Interest has been raised as part of the capital raising of the Property Sub-Fund and will be paid from the cash reserves.|
|Underlying loan security||A first registered mortgage over the property located at 54 Watts Road Kemps Creek NSW 2178 (Security Property) and a general security agreement against all the assets of the Borrower (limited to the assets of the Property Sub-Fund).|
|Security Property Valuation||$3,600,000. This represents the value placed on the Security Property by an independent property valuation company undertaken on 6th March 2020.|
|Gearing Ratio||The maximum gearing allowed is 60%. This represents the interest-bearing liabilities divided by Total Assets. The total assets include additional cash funds raised of $1.57 million at the time of the acquisition of the property to fund the property over the next 10 years and cover the interest cost on the loan.|
The actual LVR is 20% ($1,000,000/$5,120,101)
|Interest Cover Ratio (ICR)||The Security Property has industrial special risk and property & liability insurance (building & contents, loss of rent, material damage and consequential loss) in place. The insurance policy is issued by QBE Insurance.|
|Security Property Insurance||This ratio measures the serviceability of the loan. The DomaCom Fund has a minimum requirement of 1 times cover, which indicates that the property must be positively geared. The interest servicing costs have been raised as part of the capital raising costs for the Property sub-fund. Interest cover is over 30 times when you include the total cash reserves divided by the interest cost ($1.57m/$50k) = 30 times interest cover.|
|Date of making the Underlying Loan||The Loan is refinanced on the 6th of May 2020.|
|Date of repayment of the Underlying Loan||6 months from date of refinance 6th of May 2020 subject to early or late repayment.|
Maturity of the Loan
At the end of the 6 month term the Underlying Loan terminates, the Loan Sub-Fund is wound up and the capital proceeds are returned to the investors. It is anticipated that the loan will be replaced by other equity participants in the property sub-fund who will replace the loan with additional capital, or it will be refinanced.
If you would like to invest in the Landbanking Badgerys Creek loan, you can join this crowdfunding campaign by completing the application and lodging your investment funds through this General Advice page. Please ensure that you first read the DomaCom Fund’s Product Disclosure Statement (PDS). For a copy of the current PDS, please click here or call your financial adviser.
When you have lodged your bid and the campaign is filled, you will also receive a Supplementary Product Disclosure Statement (SPDS) outlining the specific offer to invest in the Landbanking Badgerys Creek Loan which will contain all the information required for you to make a decision. You are not bound to proceed with your bid amount for this Landbanking Badgerys Creek Loan crowdfunding campaign until you accept the offer contained in the SPDS (which will include the specific details for the properties).
If you are new to DomaCom, click on the Apply button to begin your application. If you are an existing DomaCom Fund investor, you can log in to access your account and all the other public crowdfunding campaigns by clicking the Investor Login button.
Refer to the section 7 of the PDS titled Risks of investing in the DomaCom Fund and the sub section 10.3 of the PDS Risks of Investing in a Loan Sub-Fund.
• No guarantee of returns – Returns are not guaranteed and Investors may lose money some or all of their income return and capital.
• Liquidity risk – An Investor cannot withdraw from the Loan Sub-Fund until the Loan Sub-Fund is wound up. DomaCom does intend to offer a facility through which Investors can seek to sell their Units to another party, however there is no guarantee of this.
• Damage or loss to Security Property – There are a range of events that can damage the Security Property including acts of God (fire, flood, earth quake and other natural disasters) through to accidents, negligence, and failures of maintenance. The Borrower’s insurance may not cover or may not fully cover such losses which can impact its ability to repay the Underlying Loan. There are insurances in place, the Security Property has industrial special risk and property & liability insurance (building & contents, loss of rent, material damage and consequential loss) in place. The insurance policy is issued by QBE Insurance.
• Underlying Loan Servicing Risk – There may be insufficient income generated from the Security Property to meet the borrowing costs. The costs associated with Security Property may exceed its income. The Borrower will seek to ensure that there is sufficient income to meet expenses. The interest cost on the loan has already been raised as part of the capital raising funds to acquire the property.
• Asset Risk – The property is currently valued at $3,600,000 and there are cash reserves of $1,574,362 and the Loan amount is $1,000,000. The gearing ratio is 20% due to value of the land and the cash reserves that have been raised as part of the capital raising. The independent property valuation of the property was $3,600,000. The value of the Security Property would need to fall by more than 80% to put at risk the repayment of the Underlying Loan. Furthermore, there is cash also held in the Sub-Fund. While there is a buffer and property markets would need to fall significantly investors should be aware of this risk.
• Interest Rate risk – The interest rate has been set at 10% p.a. and is fixed for a period of 1 years. This interest rate is significantly above the official cash rate of 0.25% p.a. and reflects the risk margin for this investment.
• Non-recourse lending – Investors should be aware that the Underlying Loan is secured with a first ranking registered mortgage over the Security Property that is held by the Borrower. In addition, the Underlying Loan is secured through a general security agreement against all the assets of the Borrower specific to the Property Sub-Fund. If the Borrower defaults, there will be recourse to all the assets of the Borrower (limited to the assets of the Property Sub-Fund that holds the Secured Property) however, there will be no recourse to any other assets of the DomaCom Fund, nor any recourse to the assets of the Trustee, the Manager, or the Custodian.
• Economic risk – There is a risk that the general economic conditions in Australia may change in relation to interest rates, employment rate and economic growth that could in turn have an impact on the property market and specifically the value of the Security Property and the Borrower’s ability to repay the Underlying Loan.
In the current climate of the Coronavirus crisis, there has been a significant reduction in economic activity globally, leading to increases in unemployment and governments around the world introducing stimulus packages, it is difficult to determine how long the crisis will continue.
• Security Property Sale risk – There is a risk that if the Security Property was needed to be sold at the conclusion of the term of the Loan Sub-Fund. This may cause delays in the repayment of capital to the Loan Sub-Fund beyond the Loan Sub-Fund’s 6 month term.
All costs in relation to establishing the Underlying Loan will be paid by the property sub-fund. No transactional and operational costs will be borne by Investors of the Loan Sub-Fund. Costs in relation to the Valuation fees, building inspections and legal conveyancing costs will be met by the property sub-fund.
The estimated total ongoing operating costs for the Loan Sub-Fund represent the management fee of 0.44% p.a. This fee will be met from the repayment of borrowing costs by the Borrower from the property sub-fund.