Peet

“Since our company was founded 125 years ago, we’ve put around 500,000 Australians into affordable housing. Our vision going forward is to double that,” he says.

For Gore, it’s a continuation of a heritage that has seen Peet focus on getting more people into their own homes through depression, war, booms and busts. But it’s also a robust response to a very contemporary problem in Australia. “The challenge of affordability has never gone away. Land is getting more expensive and population growth is continuing, so we have to keep focused on getting affordable product to market,” explains Gore.

Hand in hand

For Peet, an important part of the vision is delivering housing that is both affordable and sustainable. That means there’s a strong impetus towards innovation. “We’re making our homes more affordable through innovative ways of delivering land, through developing lightweight construction materials and through speed to market,” says Gore.

But it also means a different approach to water and power, based on true sustainability principles. Peet takes a holistic approach to its developments that are based on community need, rather than getting the most number of houses on the least amount of land.

“Being water wise, using solar power and integrating sensitively into natural landscape are crucial,” says Gore. It’s about being responsible, but it’s also a response to customer demand. “Our customers now expect a sustainable house – it’s better for the environment and for their own finances. We engage with our communities so we can keep evolving,” says Gore.

Solving the Capital Conundrum

One of Peet’s biggest challenges has always been access to debt capital to fund land acquisition as well as their property developments. And with the company growing, the challenge was becoming more acute. At the same time, land financing is complex – it needed a specialist financing partner to successfully finance in such an evolving landscape.

Simplicity is the key

By 2017, the company needed to diversify its capital even more – and was eagerly eyeing the retail investor base. Importantly, Peet decided to issue its first debt capital markets deal under simple corporate bond documentation. “We already had a retail convertible bond on the market and we put a structure in place where you could convert one for the other. It opened up the retail market and made it easier to tap,” says Andrew Gordon, director, debt capital markets at NAB.

A simple corporate bond structure makes it easier for retail investors to access corporate bonds, which typically have been the domain of wholesale and institutional investors. (See below for more information on simple corporate bond structures). Peet was only the second issuer to issue under this regime and the first to tap.

“The simple corporate bonds also allowed Peet to pay down their senior debt, which opened the door to finance some significant joint ventures, and gave the group more headroom to transact on the front end of their business,” explains Gordon.

The response to both the initial transaction and the $50 million tap was strong – the initial deal was launched at $75 million and upsized to $100 million and was oversubscribed by 1.4 times. “Investors liked the bonds because they provide a yield that’s effectively asset-backed by underlying land,” says Gore. “So even though it was unsecured, there was a significant amount of security that supported the bonds.”

Accessing the corporate bond market has been nothing short of transformational for the company: “It’s strengthened our balance sheet and given us a significant increase in the term of our debt, while opening up a new funding source for the company to keep growing,” says Gore.