A seven-year hold strategy combining 36 residential units and 850 sqm of ground-floor retail in a high-density urban infill location. AUD $8.1M equity commitment targeting stabilized income and terminal value appreciation.
10.3%
Levered IRR
Base case, 7-year hold
2.03x
MOIC
Net equity multiple
1.26x
Stabilized DSCR
Post lease-up coverage
$8.2M
Peak Exposure
AUD, at stabilization 2029
Exhibit 1
Investment Recommendation — IC Scoreboard
Base case delivers a 10.3% levered IRR and 2.03x MOIC — above the 8% IC hurdle — with front-loaded risk that fully resolves post-stabilization.
10.3%
Levered IRR
Base case — above 8% IC hurdle
2.03x
MOIC
Net equity proceeds of $14.1M on $8.1M invested
15.8%
Upside IRR
At 4.5% exit cap scenario
Source: Model base case | CONFIDENTIAL
Exhibit 1
Investment Recommendation — IC Scoreboard
$18.1M
Total Cost
All-in project basis including land, hard, soft, and financing costs
$8.1M
Equity Invested
Equity deployed over the construction and lease-up period
$8.2M
Peak Exposure
Cumulative equity at risk at stabilization (2029)
$14.1M
Net Exit Proceeds
Equity returned at Year 7 disposition after debt repayment
Investment Committee Summary: The base case (5.25% exit cap) produces 10.3% IRR and 2.03x MOIC, above the 8% IC hurdle. The upside scenario (4.5% cap) expands IRR to 15.8%. The sole covenant breach occurs in the lease-up year, with reserves deployed as designed. Coverage exceeds 1.25x from Year 2 onward.
Source: Model base case | CONFIDENTIAL
Exhibit 2
What Drives the Return — IRR Decomposition
Returns are primarily driven by terminal value (+3.6pp) and leverage (+3.2pp), with lease-up drag (−1.5pp) and fees (−0.8pp) as known, bounded costs absorbed within the base case. Exit cap rate remains the dominant sensitivity variable, with each 100bps movement generating approximately ±3.5pp of IRR impact. The decomposition below traces each contributor from the unlevered starting yield to the final levered IRR of 10.3%, providing full return attribution transparency for the Investment Committee.
Unlevered Yield: 5.8%
Core NOI return independent of financing. Represents the stabilized cash-on-cash return on total project cost — the foundation of the return stack.
Leverage: +3.2%
Debt priced below the unlevered yield amplifies equity returns. The positive spread between the asset yield and the cost of debt creates incremental IRR for equity investors without additional operating risk.
Lease-Up Drag: −1.5%
Year 1 vacancy and below-stabilized cash flow create a finite, known drag on IRR. This cost is pre-funded through interest reserves and does not require incremental equity. It resolves fully by Year 2 as occupancy normalizes.
Terminal Value: +3.6%
Exit at a 5.25% cap rate on Year 7 NOI of $1.23M generates $23.5M gross proceeds — the dominant return driver. Terminal value contributes the largest single component of total IRR and reflects achievable, conservative exit pricing relative to comparable urban infill assets.
Source: Model base case | CONFIDENTIAL
Exhibit 3
Downside Protection — Sensitivity Matrix
No scenario produces a capital loss — the 8% IRR hurdle requires a simultaneous 125bps cap rate expansion and 5% NOI decline to breach.
8%
IC Hurdle IRR
Requires 125bps cap expansion + 5% NOI decline to breach
2.5%
Worst Case IRR
7.0% cap + −10% NOI — equity positive in every scenario
1.40x
Worst Case MOIC
No scenario produces a capital loss
11.7%
Best Case IRR
5.0% cap + +10% NOI upside scenario
Source: Model base case | CONFIDENTIAL
Exhibit 3
Downside Protection — Sensitivity Matrix
Cap Rate Resilience
At base NOI, clears 8% IRR up to 6.5% exit cap — 125bps of headroom above base assumption.
NOI Resilience
At 5.25% cap, a 10% NOI decline still produces 9.1% IRR / 1.96x — above IC hurdle.
Combined Stress Floor
7.0% cap + −10% NOI → 2.5% IRR / 1.40x. Positive equity preserved in every scenario.
Upside Capture
5.0% cap + +10% NOI → 11.7% IRR / 2.24x, representing meaningful upside optionality.
Source: Model base case | CONFIDENTIAL
Exhibit 4
Capital Stack and Equity at Risk Over Time
The capital structure layers $10.0M of senior debt against $8.1M of committed equity, producing a loan-to-cost ratio of approximately 55%. Peak equity at risk reaches $8.2M at stabilization in 2029, reflecting cumulative equity contributions through the construction and lease-up period. Implied asset value — derived from NOI capitalized at the underwritten exit cap — exceeds total project basis from Year 2 onward, establishing a positive equity buffer well ahead of the exit. Net equity at Year 7 disposition totals $14.1M, representing a 2.03x return on invested capital.
Debt — $10.0M
Drawn at construction completion. Amortizes from $10.0M to $8.8M by exit. IO during the construction period; amortizing at 5.8% post-completion. Senior position with standard covenant package.
Equity — $8.1M
Deployed progressively over the construction period in line with the development draw schedule. Peak exposure of $8.2M reached at stabilization in 2029, reflecting capitalized interest and cost-to-complete drawdowns.
Implied Value
NOI capitalized at the underwritten exit cap rate crosses total project basis approximately in 2030, establishing a positive equity buffer. Gross asset value reaches $23.5M at Year 7 exit, driven by NOI growth and terminal cap rate.
Net Equity — $14.1M
Gross exit value of $23.5M less disposition costs of $0.6M and remaining debt of $8.8M yields $14.1M net equity proceeds to investors at Year 7 disposition. This represents the realized MOIC of 2.03x on committed equity.
Source: Model base case | CONFIDENTIAL
Exhibit 5
Development Budget and Draw Curve
Total project uses of AUD $18.1M are funded by $8.1M equity and $10.0M senior debt — sources and uses balance to the dollar.
S&U Reconciliation
Total Sources: AUD $18,101,531
Total Uses: AUD $18,101,531
Variance: $0 — TIES
Capitalized Interest: $723K (included in uses)
Reserve Plug: $460
Cost Breakdown
Land: $2.8M — acquired pre-development at fixed basis
Hard Costs: $11.5M — contracted under GMP schedule, limiting cost overrun exposure
Soft Costs: $1.4M — architecture, engineering, and permitting fees
Contingency: $920K — 8% of hard costs, within market standard for this program type
The lease-up ramp is modeled conservatively against comparable urban infill projects, with residential absorption tracking from 68% to 96% occupancy over 12 months and retail stabilizing from 51% to 93% over an 18-month period. The residential component benefits from strong underlying demand dynamics in the target submarket, with LOI activity already tracking ahead of projections for the retail tenancies. The Year 1 DSCR of 0.84x reflects the transitory lease-up period and is fully anticipated within the underwriting — interest reserves of $207K are pre-funded to cover the shortfall without breaching the capital commitment envelope. Coverage exceeds the 1.25x covenant threshold from Year 2 onward and continues to improve as rent escalation compounds through the hold period.
Residential
68% → 96% over 12 months
36 units, market rent, 4% annual escalation. Lease-up driven by strong submarket absorption rates and competitive positioning relative to comparable new supply.
Retail
51% → 93% over 18 months
850 sqm across 2–3 tenancies. LOI pipeline currently tracking for anchor tenant. CPI-linked rent steps embedded in lease structures from commencement.
Revenue Build
EGR: ~$1.1M → $1.65M
Effective gross revenue growth driven by two concurrent forces: occupancy normalization through lease-up and contractual rent escalation across the stabilized portfolio.
Source: Model base case | CONFIDENTIAL
Exhibit 7
NOI Build and Margin Architecture
NOI grows 92% from $640K to $1.23M over the hold period, driven by occupancy normalization and 3–4% contractual rent escalation.
850 sqm, CPI-linked rent, 2–3 tenancies with LOI tracking
Fixed OpEx
$137K/yr + 3% CPI — low fixed cost base relative to revenue
Variable OpEx
8% of residential revenue + 12% of retail revenue
PM Fee
5.5% of Effective Gross Revenue
Source: Model base case | CONFIDENTIAL
Exhibit 7
NOI Build and Margin Architecture
$640K
2029 NOI
70% margin at lease-up
$980K
2030 NOI
73% margin at stabilization
$1.23M
2035 NOI
75% margin at exit
11.5%
NOI CAGR
Compounding over hold period
Source: Model base case | CONFIDENTIAL
Exhibit 8
Debt Service, DSCR, and Lender View
The loan structure provides interest-only terms during the construction period, with full principal amortization commencing post-completion at a fixed rate of 5.8%. The DSCR trajectory from 0.84x at lease-up to 1.81x at exit, alongside a pre-funded $207K reserve, addresses the single covenant breach in the lease-up year.
5.8% Fixed Rate
Post-completion amortizing rate. IO during construction period.
DSCR: 0.84x → 1.81x
Lease-up to exit trajectory. Reserve pre-funds the single covenant breach year.
Debt Yield: 6.4% → 12.3%
Improves materially as NOI compounds through the hold period.
$207K Reserve
Pre-funded to cover lease-up shortfall. No additional equity required.
Source: Model base case | CONFIDENTIAL
Exhibit 8
Debt Service, DSCR, and Lender View
1
2027 — Construction
IO only. Interest capitalizes to basis. No debt service obligation during build period.
2
2029 — Lease-Up
DSCR 0.84x. Reserve of $207K deployed as designed. Single covenant breach — fully anticipated and pre-funded.
3
2030 — Stabilization
DSCR 1.43x. Covenant compliance fully restored. Debt yield improves materially as NOI compounds.
4
2035 — Exit
$8.8M remaining debt repaid from $23.5M gross proceeds. DSCR 1.81x at disposition. Clean exit execution.
Source: Model base case | CONFIDENTIAL
Exhibit 9
Exit Valuation and Equity Proceeds
Year 7 exit at a 5.25% cap rate on $1.23M NOI produces $23.5M gross value — net equity proceeds of $14.1M represent a 2.03x MOIC.
Exit Waterfall
Year 7 NOI: $1.23M
Exit Cap Rate: 5.25%
Gross Value: $23.5M
Less Disposition Costs (2.5%): −$0.6M
Less Remaining Debt: −$8.8M
Net Equity Proceeds: $14.1M
Exit Cap Sensitivity
The exit cap rate is the dominant return driver, with each 25bps of expansion reducing levered IRR by approximately 90bps. The base case assumption of 5.25% sits conservatively within the range of current comparable transactions.
Cap +50bps (5.75%): Gross $21.4M — Net ~$12.0M (−15% vs base)
Base (5.25%): Gross $23.5M — Net $14.1M (IC target scenario)
Cap −50bps (4.75%): Gross $25.9M — Net ~$16.5M (+17% vs base)
Source: Model base case | CONFIDENTIAL
Exhibit 9
Exit Valuation and Equity Proceeds
Upside: 4.75% Cap
Gross $25.9M — Net ~$16.5M (+17% vs base)
Base: 5.25% Cap
Gross $23.5M — Net $14.1M — IC target scenario
Stress: 5.75% Cap
Gross $21.4M — Net ~$12.0M (−15% vs base)
Source: Model base case | CONFIDENTIAL
Exhibit 10
Cash Flow Profile and Distribution Timing
93% of total investor return is realized at the Year 7 disposition — underwrite this as a capital appreciation vehicle, not a current income strategy.
1
2027–2028: J-Curve
Equity drawn progressively. No distributions. Annual cash flow: −$5M to −$3M. Construction period. IO debt serviced from capitalized interest reserves.
2
2029: Peak Exposure
$8.2M cumulative equity at risk. Lease-up commences. DSCR temporarily below covenant. Reserve deployed. No distribution.
3
2030–2034: Stabilized Ops
Positive operating cash flow of ~$100–500K/yr after debt service. Represents 7% of total investor return over the stabilized hold period.
4
2035: Exit
$14.1M net proceeds distributed. 93% of total return realized at disposition. MOIC: 2.03x on committed equity capital.
Source: Model base case | CONFIDENTIAL
Exhibit 10
Cash Flow Profile and Distribution Timing
93%
Return at Exit
Share of total investor return realized at Year 7 disposition
7%
Operating Distributions
Share of total return from stabilized operating cash flows (2030–2034)
Source: Model base case | CONFIDENTIAL
Exhibit 11
Risk Register, Quantified Impacts, and Monitoring
All identified risks are known, bounded, and monitorable — the two material breakpoints are a lease-up delay of 6+ months (−1.8pp IRR) and a 100bps cap rate expansion (−3.5pp IRR).
Source: Model base case | CONFIDENTIAL
Exhibit 11
Risk Register — Key Takeaways
Dominant Risk: Exit Cap
100bps expansion = −3.5pp IRR. Requires 125bps + 5% NOI decline to breach 8% hurdle.
Worst combined scenario: ~5.0% IRR. Equity-positive in every modeled scenario.
Combined Stress Note: A simultaneous lease-up delay of +6 months and exit cap expansion of +100bps produces a combined IRR impact of approximately −5.3%, reducing levered IRR to ~5.0%. This scenario remains equity-positive and above the cost of unlevered capital. P = Probability | I = Impact | IRR Δ = Levered IRR impact from base case sensitivity.
Source: Model base case | CONFIDENTIAL
Exhibit 12
Execution Plan and Decision Gates
Program governance is structured around four sequential decision gates — no phase proceeds without IC sign-off on prior gate evidence.
Gate 1 — Q2 2027: Equity & Debt Commitment
DA approved by council. Equity fully funded and committed. Debt commitment letter received from senior lender. Insurance bound. Builder's risk in place prior to construction commencement.
Gate 2 — Q3 2027: GMP Lock
Fixed-price GC contract executed under GMP schedule. Confirmed builder credentials and program timeline. Any cost variance from budget to be resolved before construction draw authorization.
Source: Model base case | CONFIDENTIAL
Exhibit 12
Execution Plan and Decision Gates
Gate 3 — Q1 2029: Construction Start / PC Achieved
Practical completion achieved. ≥80% of residential units leased or under lease execution. First retail tenant trading. Lease-up program initiated and tracked against monthly absorption plan.
Gate 4 — Q4 2035: Stabilization / Exit
12 months of stabilized NOI confirmed against underwriting. Broker engagement completed. IC sale or refinancing vote conducted. Disposition executed and net equity proceeds distributed to investors.
Source: Model base case | CONFIDENTIAL
Appendix A
Model Integrity and Audit Controls
The financial model underpinning this investment memorandum incorporates 16 automated audit checks, all currently passing, across 473 formulas, zero errors, and 8 structured tabs. A single assumptions engine governs all inputs, ensuring that changes to any variable cascade consistently through the full model without the risk of broken references or stale hardcodes. Controls are designed to fail loudly — any input change that breaks a reconciliation or logical check will surface immediately as a visible error flag, eliminating the possibility of silent model drift. The model has been independently reviewed against the reconciliation summary below and confirmed to tie at every level.