Case Study: Pittwater RSL – Investment Evaluation

7 July

Location: Mona Vale, NSW

Background

Pittwater RSL was presented with an investment opportunity by a Third party Property Group

involving the redevelopment of a site, directly opposite the RSL’s current premises, which

has been proposed for a new serviced apartment complex with three possible uses:

 Fully commercial serviced apartments

 Seniors serviced accommodation

 Mixed-use combination of the above

The development scenarios vary by capacity of number of beds. The development proposal

outlined projected financial returns and development responsibilities between the property

developer/owner and the RSL.

Key Observations

 Risk Allocation Imbalance: The financial structure proposed suggests RSL bears all

key risks—development, funding, market, and occupancy—while Developer’s role

and exposure are limited, yet its proposed return were significantly higher.

 Reliability of Valuations: The financial projections reference unverified “market

appraisals” by a local real estate agency rather than certified valuations.

 Unverified Market Demand: There was no supporting evidence of market demand for

serviced apartments (commercial or seniors) in Mona Vale.

 Turnkey Construction Clarity Needed: The term “turnkey” implies the Developer

would fund and deliver construction before handover, yet details were lacking

regarding funding responsibility and timing of RSL’s payments.

Preliminary Conclusion

While the project offers an attractive headline return (13% ROI) for Pittwater RSL, the

proposal placed disproportionate financial exposure and delivery risk on the RSL, while

rewarding the Developer with an 80% return without evident risk. The feasibility and

credibility of the financial projections required deeper validation through:

 Independent valuation review

 Market demand analysis

 Legal due diligence on risk transfer mechanisms

 Sensitivity analysis of occupancy and revenue scenarios

This recommendation was that the investment opportunity should not proceed without

substantial further due diligence and renegotiation of risk/reward balance.

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