Mariner Coastal Land Fund

A MEMBER OF THE MARINER FINANCIAL GROUP
Mariner Coastal Land Fund
Investor Update – June 2008
The following investor update includes:
An overview of current market conditions
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Information on Mariner’s strategy for
Yamba Waters and the Blue Dolphin
An update on debt and distributions.
Mariner Securities Limited ABN 87 002 163 180, AFSL 237 091.
blue dolphin udpate (essence of yamba)
Strategy update
The project was finally approved in July 2007 by the NSW
Minister for Planning as a mixed use development
comprising residential and retail tourist facilities. The
approval represented a significant improvement on the
local environmental plan with increases in height of the
buildings and a substantial confirmed gross floor area.
A number of options have been considered and analysed
by the Mariner Coastal Land Fund (MCLF) based on both
the risk and potential returns to unitholders. Factors taken
into account in determining the most appropriate line of
action are:
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successful DA approval;
Implementation of the sales and marketing campaign for
Essence of Yamba was put back following delays in
obtaining the development approvals.
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current market conditions;
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the prime location of the site adjacent to the
Clarence River;
The approved master plan includes:
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the future growth of Yamba as a tourist destination;
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the views of the co-owners, the Mitchell family; and
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comparable sales in the area.
Stage 1
Fifty five apartments including 5 penthouses, 13 three
bedroom apartments, and 37 one and two bedroom
apartments. Building one enjoys a waterfront position and
access. Building two sits behind Building one and is
separated by a pool and landscaping.
Stage 2
Strata titled residential apartment resort with restaurant,
bar, conference facilities, a gym, pools, day spa, tennis
courts and other facilities available to residents, guests
and the local community.
Stage 3
Master planned residential facilities for owner-occupiers
and investors, including a number of waterfront villas.
Mariner has completed construction of the display suite
for Essence of Yamba in late December 2007, thereby
launching the sales campaign for the project. Unseasonal
wet weather for much of summer 2007/2008 impacted
the volume of visitors to Yamba and consequently the
number of potential purchasers. Moreover, recent volatile
market conditions and an inevitable slowdown in property
sales has further affected enquiries.
In view of this, it is now anticipated that the sales period
for Stage 1 will extend for another year to the first quarter
of 2009. This will delay the completion of Stages 2 and 3.
To mitigate development risks Mariner proposes to
consolidate the asset structure of the Trust and
reorganise funding for the delivery of the development
strategy for Blue Dolphin. This involves placing the Yamba
Waters Tourist Park on the market. Sale proceeds will be
used to partially retire some of the Trust’s debt. Any
balance remaining will be held in cash to service the $7.5
million debt facility currently in place for the development
of Stage 1 – Essence of Yamba (otherwise known as Blue
Dolphin). The settlement date for Yamba Waters is
anticipated to be late 2008.
The Blue Dolphin Development Joint Venture (BDDJV) is
also looking at the possibility of taking a partial surrender
of the Freespirit lease on the Blue Dolphin site for the
Stage 1 area. This will necessitate a rent reduction of
$320,000 p.a. but gives the BDDJV full access to the site
for sales and marketing purposes. This will also activate
the development access fee payable to the co-owners,
which would be paid out of an increased debt facility.
Increasing the Blue Dolphin development debt facility to
$9.5 million will:
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provide sufficient capital to undertake works for
Stage 1, and create a dedicated access to the Sales
and Marketing display suite, rather than through the
existing resort;
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provide sufficient capital to pay the access fees to the
co-owners for a period of 2 years;
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provide sufficient capital to cover on-going costs for a
period of 2 years; and
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provide capitalised debt interest cover for a period of
2 years.
Mariner considers the restructuring strategy as prudent in
the current uncertain market since it provides sufficient
liquidity whilst retaining a prime DA approved land holding
that is generating an income stream.
By adopting this approach we retain a number of takeout strategies for the Fund:
The LVR against the current valuation (dated
December 2007) would be approximately 25%.
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Complete the development on an extended time line;
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Sell down Stage 1 of the development; or
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Sell the entire Blue Dolphin site.
The market conditions are presently not conducive to a sale of the site but it is worth noting comparable sales. None of the
sites listed below currently have any planning approval for redevelopment.
AddressDatePriceArea m2
Zoning
$/m2Comments
‘Star of the Sea’
17 Clarence St
Yamba
Delayed settlement
as requested by
vendors to Dec 08
$10,600,000
4,011
Res 2(t)
$2,642
On Yamba Hill
‘Moby Dick’ Motel
Yamba Rd
June 07
$8,200,000
5,455
plus 1,526
leasehold
Res 2(t)
$1,503
Adjoins Blue
Dolphin
‘Fishing Co-op’
15 Yamba Rd
Oct 05
$2,560,000
1,707
Res 2(t)
$1,500
Comparable
location
Ballina Gateway
Aug 05
$8,487,756
5,965
3 Bus
$1,423
Similar location
Distributions/Development Returns
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An annual return of approximately 9.05% is
forecast for the financial year ending June 2008.
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It is intended to use the income from the lease with
Freespirit Resorts Pty Ltd to continue making
distributions during the Stage 1 sales and marketing
phase, although at a reduced level to those paid to
date. Income distributions are expected to be
between 2.5% to 4.5% p.a. for the period from
July 2008 to June 2013.
Development Returns
Stage 1Stage 2Stage 3
Date of development profit distribution
Q2 2011
Q3 2012
Q2 2014
Land used for development
$3.2 million
$10.7 million
$10.9 million
Development profit
$2.36 million
$7.5 million
$12.9 million
All numbers above are estimated and subject to various market conditions.
Our current cost, including purchase and development
fees, is less than $600/m2, so our view is that if we hold
the site until conditions improve the Blue Dolphin site
should have significant upside value.
Brisbane; and initiated an advertising and press campaign
in all major property media. It is intended to continue the
marketing campaign through the tough market conditions
in the forthcoming months, but on a reduced budget.
Key Fund Information
Trust Debt
Fund size
$25 million
Revised projected IRR 13.67%
Current borrowings
18% of total assets
The co-owners currently carry total debt of $8 million from
Westpac Banking Corporation secured against both the
Blue Dolphin and Yamba Waters resorts. As outlined
above, the expected sale of the separate Yamba Waters
site provides the opportunity to reduce the debt, and to
service the interest on the facility for the development of
Stage 1. The Trust debt liability is 55% of this amount with
the Mitchell partnership holding 45% of the equity and
debt liability.
Sales and Marketing Program
Mariner completed development of the display suite
apartment and launched Essence of Yamba in December
2007 for the summer marketing period. Mariner has
undertaken a targeted direct marketing campaign focusing
on high net worth investors in Sydney, Melbourne and
To find out more about the Mariner Coastal Land Fund, please contact
your financial adviser. Alternatively, call our Investor Services Team on
1800 009 963, or visit us at <www.marinerfunds.com.au>.
Mariner Financial Limited
Sydney
Level 40, The Chifley Tower
2 Chifley Square
Sydney NSW 2000
Telephone 02 9238 0750
Facsimile 02 9238 0790
Brisbane
Level 5, 320 Adelaide Street
Brisbane QLD 4000
Telephone 07 3010 9433
Facsimile 07 3010 9001
USA
15th Floor, 101 Arch Street
Boston MA 02110
Telephone +1 617 423 1268
Facsimile +1 617 338 0279
Melbourne
Level 20, 101 Collins Street
Melbourne VIC 3000
Telephone 03 8317 1111
Facsimile 03 8317 1199
Adelaide
Suite 25, 8 Greenhill Road
Wayville SA 5034
Telephone 08 8372 7896
Facsimile 08 8372 7800
UK
18 Hanover Square
London W1S 1HX
Telephone +44 (0)20 3008 5341
Facsimile +44 (0)20 3008 5344
Mariner Financial Limited ASX: MFI
www.marinerfunds.com.au
Investor Services: 1800 009 963
Adviser Services: 1800 009 964
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