29th September 2023
Dear Investors,
We are pleased to provide this investor update with respect to the ASCF Private Fund.
Since our last quarterly update, the fund has continued to perform strongly, and we would like to take this opportunity to provide you with detailed information on each of the investments in the fund as at 30th June 2023.
Key Fund Information
Funds under management as at 30th June 2023: $ 34,398,322.14
Current unit price – $1
Income Distribution for August 2023: Paid
Fund Investments as at 30th June 2023
ASCF Private Fund, via its wholly-owned sub-fund Australian Mortgage Finance Services Fund (AMFS), has undertaken several investments under its mandate since inception and listed below are the current list of investments as at the 30th June 2023.
ASCF High Yield $17,477,558.22 (refer note 1.)
ASCF Select Income Fund $3,000,000 (refer note 1.)
ASCF Premium Capital Fund $1,600,000 (refer note 1.)
ASCF Managed Investments Pty Ltd C Class Notes $3,000,000 (refer note 2.)
ASCF Managed Investments Pty Ltd C Class Notes $4,040,000 (refer note 3.)
Direct Loan Investments $4,809,236.96 (refer note 4.)
Cash at Bank ASCF Private $155,611.59
Cash at Bank AMFS $331,236.19
ASCF Private and AMFS Half Year Financials
The financial statements for ASCF Private and its wholly owned sub fund Australian Mortgage Finance Services for the full year ended 30th June 2023 are currently being finalised and will be available for viewing or download on the ASCF Private website prior to the 30th October 2023.
Note 1. ASCF High Yield and ASCF Select Income
AMFS has $17,477,558.22 invested in ASCF High Yield Fund, $3,000,000 invested in ASCF Select Income Fund, and $1,600,000 invested in ASCF Premium Capital Fund, all being retail funds managed by Australian Secure Capital Fund Ltd.
AMFS, as a wholesale investor, receives a preferential rate of 8.60% per annum paid monthly from the funds due to the amount invested.
All interest payments have been made on time and in full by ASCF High Yield, ASCF Select Income and ASCF Premium Capital Fund to AMFS at the prescribed rate on the due dates.
The audited financials for each of the retail funds for the full year ended 30th June 2023 are available for viewing or download by clicking here.
For further information concerning our retail funds, please refer to the Product
Disclosure Statement by clicking here or visit our website ascf.com.au where you will be able to view our monthly updates on our retail funds.
Note 2. ASCF Managed Investments Pty Ltd C Class Notes
ASCF Managed Investments Pty Ltd (ASCFMI) is a part of the ASCF Group of Companies and issued a $35m bond in September 2018 by issuing A, B and C Class Notes, which were fully subscribed.
A copy of the IM for ASCF Managed Investments Pty Ltd is available by clicking here.
ASCF Private, via its sub-fund AMFS, acquired the C Class notes on the 17th of June 2021 for a consideration of $3,000,000 at par value. These notes earn 15% per annum, payable monthly by the Mortgage Capital Australia Trust, which acts as the service entity to the ASCF Group. This transaction was foreshadowed in the ASCF Private Information Memorandum under clause 3.2(b).
Since the completion of the transaction, all interest payments have been made on time and in full by the Mortgage Capital Australia Trust to AMFS at the prescribed rate on the due dates.
Note 3. ASCF Managed Investments Pty Ltd C Class Notes
On the 7th of December 2021, ASCF Managed Investments Pty Ltd issued additional C Class notes totaling $4,040,000. On the same day, it redeemed the B Class notes then on issue totaling $4,000,000.
These notes were issued on the same terms as the existing C class notes. The notes were acquired by AMFS and earn interest of 15% per annum payable monthly by the Mortgage Capital Australia Trust.
Since the completion of the transaction, all interest payments have been made on time and in full by the Mortgage Capital Australia Trust to AMFS at the prescribed rate on the due dates.
The audited financials for ASCF Managed Investments Pty Ltd for the financial year ended 30th June 2022 have been completed and are available for viewing or download by clicking here.
The loan book for ASCF Managed Investments Pty Ltd continues to track well and aligns with the prior year’s performance.
ASCF Managed Investments Pty Ltd is required to undertake quarterly audit reports to ensure it is not in breach of any of its note covenants or eligibility criteria. The audits are undertaken by Grant Thornton and are due 45 days after the end of each quarter. Please click here to view the quarterly audit report for the June 2023 quarter.
Note 4. Direct Loan Investments
AMFS direct loan investments to date have been loans acquired via assignment that are in default from the ASCF retail funds and ASCF Managed Investments Pty Ltd at reasonably conservative loan to valuation ratios.
The benefit of acquiring defaulting loans is that the interest rate applicable to these loans is much higher than the standard rate charged to borrowers who pay their interest on time.
These loans, therefore, offer a high internal rate of return on the capital invested in the loan presuming the full loan value including all loan interest and fees are recovered.
In addition to acquiring loans in default from our retail funds AMFS jointly funded a new loan origination during the March 23 quarter being loan no. 2 noted below. The intention is for the fund to originate new loans in the future either in its own right or jointly fund loans with the ASCF Retail Funds at interest rates that provide a healthy net interest margin.
Listed below are the details of the current direct loan investments held by AMFS as at the 30th June 2023.
Loan No. 1 Assigned Loan
| Loan Assignment Date | 11th March 2022 |
| Loan security | 1st registered mortgage |
| Loan balance at 30/06/23 | $2,850,583.02 |
| Loan value on assignment | $1,534,611.49 |
| Valuation | $4,000,000 |
| Estimated current LVR at 30/06/23 | 71.26% |
| Standard loan interest rate | 15% p.a. |
| Default loan interest rate | 30% p.a. |
| Property details | 10 lot residential subdivision Old Beach, Tasmania plus residual land. |
On the 11th of March 2022, AMFS made its first direct loan investment by accepting an assignment of a defaulting loan from ASCF Managed Investments Pty Ltd for a total consideration of $1,534,611.49.
The assignment granted AMFS mortgagee in possession rights over a development approved 10 lot subdivision in Tasmania, which the borrower never completed plus residual land.
AMFS has subsequently paid for all the civil works associated with the subdivision and all works have now been completed and we are pleased to advise that the individual titles for each of the 10 lots have issued.
The lots are currently being marketed for sale however the market in Tasmania has softened somewhat since so whilst we were expecting to receive around $350,000 per lot, the current expectations are closer to $300,000 per lot.
Since our last update we have also progressed a further 3 lots subdivision on an adjoining lot which formed part of the same parcel of land and we are currently awaiting formal approval from council which we believe to be imminent. This will bring the total subdivision to 13 lots and we expect this 3 lot subdivision to be completed later this year.
One of the issues which we encountered while marketing the lots related to a bushfire buffer zone imposed by council on the rear of 4 of the blocks which constrained the area on which a residential property could be built on these lots. We have applied to council to reduce this from 15 meters to 5 meters and we have been informed the approval should be issued within the next 2 weeks thereby improving the salability of the lots.
We have also engaged with GJ Gardner Homes in Tasmania and are currently assessing our options of selling the properties as house and land packages to maximise the returns.
We are confident that the full amount owing under the loan will be repaid in full upon completion of the sale of each of the lots and that we will also recover the majority of the default interest owing on the loan.
There is a further parcel which forms part of the residual land and comprises 3.2 hectares in total. We are currently exploring the development options for this lot also however we do believe this lot will increase the gross returns on the loan once all properties are sold.
Loan No. 2 Jointly Funded New Loan
| Loan Assignment Date | 10th March 2022 |
| Loan security | 1st registered mortgage |
| Loan balance at 30/06/23 | $663,944.10 |
| Loan interest rate including monthly fees | 15.2% p.a. |
| Loan to value ratio (LVR) at 30/06/23 | 62.68% |
| Property details | Various residential subdivision and completed land and completed lots in Ipswich, Bundamba, Brassal, Blackstone and Collingwood Pk, Qld |
This loan advance by AMFS was part of a $12,025,000 loan provided by our retail funds across a portfolio of assets in the Western corridor of Brisbane. The total security held for the loan is $19,185,000 across multiple large scale predominantly residential subdivisions some of which are completed and some of which have now received council approvals and have been sold with settlement anticipated in the next 90 days.
All interest in respect to this loan has been paid and the loan is up to date.
Loan No. 3 Assigned Loan
| Loan Assignment Date | 24th February 2022 |
| Loan security | 1st registered mortgage |
| Loan balance at 30/06/23 | $678,364.21 |
| Valuation at loan inception | $860,000 |
| Standard loan interest rate | 9.65% p.a. |
| Default loan interest rate | 18.1% p.a. |
| Loan to valuation ratio (LVR) at inception | 74.42% |
| Loan to valuation ratio (LVR) at 30/06/23 | 78.87% |
| Property details | Residential land in Glendevie, Tasmania and residential house in Upper Esk, Tasmania. |
This was originally a bridging finance loan that went into default due to the sale contract on the residential house failing to settle. We have obtained possession of the vacant land in Glendevie Tasmania and this has been listed for sale to reduce the overall debt with several offers having been received. We believe the borrower has good prospects in refinancing the remaining debt once the vacant land is sold.
Loan No. 3 Assigned Loan
| Loan Assignment Date | 26th April 2023 |
| Loan security | 1st registered mortgage |
| Loan balance at 30/06/23 | $586,345.63 |
| Valuation at loan inception | $890,000 |
| Standard loan interest rate | 9.95% p.a. |
| Default loan interest rate | 19.90% p.a. |
| Loan to valuation ratio (LVR) at inception | 64.61% |
| Loan to valuation ratio (LVR) at 30/06/23 | 65.88% |
| Property details | Residential house in Shailer Park, Qld. |
This property has been sold by the borrower with settlement scheduled for the 27th October 2023. We will receive our full principal and interest including default interest from the date of assignment of the loan.
We will continue to provide additional updates with respect to the ASCF Private Fund every quarter, but should you have any queries or questions in the interim, please do not hesitate to contact me directly.
Regards,
Filippo Sciacca
Director
Investor Relations, Asset Management & Compliance – Australian Secure Capital Fund Ltd