Australian Finance Group Ltd. · ASX:AFG
Australian Finance — Investor Presentation (2020)
18 slides from Australian Finance's investor presentation, Oct 23, 2020
Slide 1: Commercial Edge Week Two
AFG BUSINESS ~ Commercial Edge Week Two
Slide 2: Housekeeping
2020 Housekeeping 1. Please stay until the end to have your attendance marked 2. Keep your video on 3. Unmute if you’d like to ask a question 4. There will be quizzes and polls during the session 2
Slide 3: Week one recap
2020 Week one recap 01 What’s the opportunity? 02 Breaking down the steps to winning in commercial 3
Slide 4: Agenda
2020 Agenda 01 Commercial property lending 02 Servicing calculations 4
Slide 5: Commercial property lending
Commercial property lending
Slide 6: Easiest place to start?
2020 Easiest place to start? Commercial property finance Asset Finance (vehicles) • Similar to residential property finance • Quick turnaround times • Substitute residential property to • Most businesses have them commercial property • Renew every 3 to 5 years • Understand the customer/business behi
Slide 7: This is the time to get into commercial property lending
This is the time to Example of difference get into commercial in repayments property lending Historically it was challenging for clients to purchase Let's look at an example of a 500K loan then or refinance a commercial property due to: and now: • High Interest rates - 5% p.a. plus Then: • Short loa
Slide 8: What is a commercial property?
2020 What is a commercial property? Commercial property refers to real estate property that is used for business activities. Commercial property usually refers to buildings that house businesses, but it can also refer to land that is intended to generate a profit, as well as larger residential renta
Slide 9: Owner occupied vs. investment commercial property
Owner occupied vs. investment Differences: commercial property Investment Owner occupied property property • Owner occupied deemed properties exist when a business owner operates their own Cashflow comes business out of a commercial property for Cashflow Cashflow is first from the operating which th
Slide 10: Investing in commercial property
2020 Investing in commercial property Advantages Disadvantages Higher returns Untenanted periods Longer lease periods Vulnerability to economic factor Fewer ongoing expenses Costly upgrades Value adding activities Lack of general knowledge and research 10
Slide 11: Goods and Services Tax (GST)
2020 Goods and Services Tax (GST) The rules surrounding GST on commercial property can be complex. It is recommended that customers seek professional advice prior to entering into any purchase contract. Generally a purchase of a commercial property will attract a GST if the property is vacant, howev
Slide 12: Commercial property in lending
2020 Commercial property in lending • Typically lower loan terms (10-30 years) • Higher interest rates (3% p.a. +) • Lower LVRs (55% - 85%) • Serviceability assessed via an Interest Cover Ratio (ICR) Model • Complex structures are more common making serviceability more difficult to assess • Alternat
Slide 13: Common Questions to ask?
Common Questions to ask? COMMERCIAL Powered by • What Type of Commercial property is being purchased? • Where is the location of the property? • What is the premises currently being used for? • What is the purpose of the purchase? Owner occ or investment? • If Owner occ does the business cashflow su
Slide 14: Servicing calc
AFG BUSINESS Servicing calc
Slide 15: How to assess serviceability
How to assess serviceability EBITDA is used to identify income from trading business Most lenders use an ICR and Debt Service Cover Ratio Earnings Before Total group income Interest = ICR Total annual Interest Tax Deprecation Total group income Amortization = DSCR Total annual Principal Let’s use ou
Slide 16: Example of commercial property purchase
Example of commercial Earning before tax Interest Total depreciation property purchase EBIDTA = $159,997 + $10,249 + $63,593 = $233,830 • Purchase price 700k $233,830 • Loan amount required 500K ICR = = 8.42x $17,508 + $10,249 • Interest repayments @ 3.5% rate is $17,508 pa • P&I repayments over 15
Slide 17: Rent vs. loan repayments
2020 Rent vs. loan repayments Purchase Loan 15 yr 20 yr 30 yr Purchase Loan 15 yr 20 yr 30 yr LVR Deposit LVR Deposit Price Amount term term term Price Amount term term term $4,000,000 80% $800,000 $3,200,000 $27,004 $22,926 $19,186 $4,000,000 65% $1,400,000 $2,600,000 $21,941 $18,628 $15,589 $3,500
Slide 18: Next week / Contact us
Contact us Next week Westpac introduction and 01 accreditation process 02 Benefits of Asset Finance for you and your clients Richele Janjatovic Dawood Odeh 03 The process from start to finish Commercial BDM Commercial BDM VIC & TAS NSW, ACT & QLD 04 Westpac’s online portal, DriveOnline Richele.Janja
Australian Finance Group — Investor Presentation (2020) on 6ix