Capel Sound Investment Option

Due diligence

Borrower’s Background

The Borrower is an experienced developer based in Australia. The Borrower has had a long-standing relationship with the Investment Manager through numerous previous loans made with related entities of the Borrower. A related entity of the Borrower has borrowed funds from the Zank Income
Fund before, and all interest had been paid on time during the life of that loan. The repayment record was good.

Geographic Summary

Location and Neighbourhood: The property is located within the established town of Capel Sound, formerly known as Rosebud West.
Locality: Capel Sound formerly known as Rosebud West is located on the Mornington Peninsula and is a popular tourist destination, particularly in the summer months. It is located approximately 80 kilometres from the Melbourne Central Activities District. The subject property is located over the road from the Capel Sound Foreshore. There are numerous attractions to the area including the Peninsula Hot Springs, Peppers Moonah Links Resort and Gold Course, and of course the Foreshore which also allows for onsite caravan parking. The area is now well established for all year-round residential occupation with schools, shopping, and leisure facilities all readily available,
Topography: The land is level in surface contour.
Access: Direct access from Truemans Road by concrete paved driveway.
Roads: Truemans Road has a bitumen sealed surface with concrete kerbs, channels, and concrete footpaths.
Services: All mains’ services including mains electricity, LP gas, water, septic tank and telephone are connected / available to the property. Drainage is adequate.

Land information

Current Use: At the date of inspection, the subject property comprised 48 short stay units, 38 of which were completed, in accordance with the Planning Permit.
General Description: The subject property comprises a former caravan park which has been converted in to a 48-unit short stay accommodation park. The units comprise 24 single level and 24 two level units. Ten of the single level units have been converted into single rooms with kitchens removed and Bed and Breakfast facilities only. In total, once complete, there will be 68 lettable units/rooms available.

Property Income

Calculation is based on an assumed occupancy rate of 30%. The net income is $1,374,960 per annum which capitalised at 8.0%, equates to a capital value of $17,187,000 on completion, say $17,000,000.
Ten units still remain incomplete and the developer advises the cost to complete the remaining units is $270,000. A contingency cost of at least $100,000 should be allowed for, therefore capital value is $16,630,000.