TCF Takes Greater Control of Bathla Recoveries and Targets Monthly Income

Bathla property sales begin converting into recoveries

360 Capital Mortgage REIT (ASX:TCF) is reporting tangible progress in unwinding its troubled Bathla exposure, with unconditional contracts now covering all three lifestyle lots, six completed homes and one land lot across Loans 1 and 2. Those contracts represent $9.0 million in net proceeds, excluding GST, while a further $10.8 million of unsold property remains based on valuation after GST and sale costs.

The update builds on the Bathla receiver appointments announced in September, when receivers were appointed to accelerate the sale process. Since then, selling agents have been appointed across all 25 properties securing Loans 1 and 2. The remaining inventory includes nine land lots, an unfinished duplex and an unfinished two-storey home, with discussions under way with owner-builders over the latter properties.

Loan 4 is also being worked down, with five townhouses exchanged or settled since receivers were appointed. TCF has received a further $0.3 million from that loan, reducing its outstanding principal to $4.6 million. The loan is secured by first-ranking mortgages over completed, individually titled townhouses in north-west Sydney.

Senior debt acquisition changes control of 72 apartments

The more consequential move concerns Loan 3, an $8.9 million subordinated loan secured by 72 near-completed apartments. The project has 36 presale contracts worth $25.8 million net of GST. Through the 360 Capital Private Credit Fund, private capital partners have acquired the project’s senior debt facility for approximately $31.2 million, with Wexted appointed as receiver.

The transaction gives 360 Capital entities both the registered first and second mortgages and other security instruments over the project and its special purpose vehicle. TCF has committed $5.2 million to Class B units in the senior facility, alongside approximately $6.0 million from 360 Capital Group and $20.0 million from private capital partners. The Class B units carry a stated return of 16.49% per annum.

TCF may also commit up to another $6.0 million in subordinated debt, subject to available capacity from its recent Bathla realisations. The proposed funding would help complete the apartments and obtain occupancy certificates, which the Trust says would facilitate settlement of the presold units and support a renewed sales campaign for the remaining apartments. Loans 1, 2 and 3 are cross-collateralised, allowing losses, costs and unpaid interest from one loan to be recovered from the others before any net proceeds are returned to the Bathla administrator.

Distribution target rests on recoveries and cash allocation

TCF is targeting monthly FY27 distributions of 5.0 cents per unit, with a potential true-up before the end of the financial year depending on recovery of principal, ordinary interest and default interest. At the $4.65 ASX closing price on 12 October, that target equates to a stated annualised distribution yield of 12.9%.

The Trust held $1.0 million in cash as at 12 October after the further $5.2 million Loan 3 investment. It has bought back 125,224 units at an average $4.96 per unit and retains capacity to repurchase another 4.7% of units on issue. The capital allocation decision sits within the on-market buyback, which was launched earlier this year, but management says future cash may instead be directed to Loan 3 or other opportunities.

Unaudited NAV stands at $5.97 per unit, broadly unchanged from the audited $5.94 at 30 June after provisioning for Bathla’s penalty interest. That leaves the units trading at a reported 22.1% discount to NAV. The discount may look notable, but the distribution target and NAV are tied to a recovery process still exposed to construction completion, occupancy approvals, settlements and future property sale prices.