.png?width=3919&height=625&name=Untitled%20design%20(23).png "August Investment Spotlight")
Property Spotlight: Forza Bay Road Fund
The Opportunity
The Forza Bay Road Fund provides investors with access to a bayside landholding at 332-336 Bay Road, Cheltenham, which Forza has acquired for $53.8m. The 55,557 sqm site sits within an established amenity corridor in Melbourne’s south-east, close to Westfield Southland, Southland train station and the proposed Cheltenham Suburban Rail Loop station. An independent valuation of the land at $73.8m is around $20m above the purchase price, a difference Forza describes as the fund’s margin of safety. The property is currently leased to an ASX-listed multinational, Laminex, on a lease with a term of three years plus a one-year option. Forza expects that once the lease expires, the existing buildings can be upgraded and re-leased, increasing the forecast distribution yield to around 9% per annum.
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The Strategy
Forza’s baseline plan runs across four phases over approximately seven years. In the first few years, the Fund draws income from the Laminex lease while Forza plans the repositioning and pre-leases new tenancies, forecasting an average distribution yield of 5.70% per annum during this period. When the lease expires, the surplus residential parcel, being 1.6 hectares of General Residential zoned land, is to be sold, with the proceeds available to reduce debt or fund the commercial repositioning. Forza then intends to reposition the existing warehouses into large-format retail, dividing them into individual premises of between 350 and 2,200 sqm, and has provisioned $39m for the works. In the final years, Forza forecasts a stabilised distribution yield of 8 to 9%, and notes that new large-format retail supply across Victoria is limited, with national vacancy at 2.8%.
Structure & Returns
The Fund raised $31.35m in equity and has a target holding period of approximately seven years. For the baseline scenario, Forza’s modelling indicates a net investor IRR of 15.0%, an investment multiple of 2.41 times, and an average distribution yield of 5.46% per annum, each stated net of fees. Around 60% of distributions are expected to be tax-deferred, and distributions are paid quarterly.
Equity Spotlight: River Capital Bite Trust
The Opportunity
The River Capital Bite Trust offers wholesale investors the opportunity to co-invest alongside River Capital in the acquisition of a 78% interest in YOMG (Yo My Goodness), a growing Australian quick service restaurant (QSR) business. Founded in 2013 in Mordialloc, Victoria, YOMG operates a network of 15 corporate-owned stores across Victoria and Queensland, built around a differentiated dual offering of premium burgers and self-serve frozen yoghurt. River Capital raised $56m from investors whereby the thesis rests on a proven store model, a long runway for national expansion, and an entry price the manager considers sensible relative to sector peers.
The Business
YOMG has grown sales at a 41% compound annual growth rate, with every store that has traded for a full year operating profitably. The combined burger and yoghurt format allows the business to trade across more parts of the day, supporting labour efficiency and store-level margins that sit in the top quartile of Australian QSR peers.
Expected Returns
On a five-year exit, the base case targets a ~2.5x money multiple (MoM) and ~21% IRR net of fees, with an upside case of ~4.0x and a downside case of ~1.5x. An annual distribution is expected, commencing at a 5% yield. The Trust was open to wholesale investors only, with a target holding period of five years.
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