NSW and VIC contain approximately 600 licensed specialised commercial properties (sex services, late-night, niche hospitality) with established use rights running with the land. New consents are near-impossible. Existing licences appreciate structurally as supply contracts. Most assets are operator-owned, single-asset, illiquid — pricing reflects this discount.
Institutional capital is structurally excluded by ESG mandates. The asset class trades at 7.5–8.0% cap rates on an isolated single-asset basis, but compresses toward ~6.0% when aggregated into a professionally-managed portfolio with corporate-grade tenant covenant.
The arbitrage: acquire isolated assets at private-market cap rates · lease to Black Fireflies OpCo on long-term triple-net covenant · hold to portfolio re-rating, OR sell into the hospitality trust roll-up under Project SX-to-ASX (sister entity).
| Field | Datum |
|---|---|
| Address | 17–19 The Seven Ways, Rockdale NSW 2216 |
| Title | Lots 8 & 9 DP 12036 · 335.1 m² site · 758 m² GBA · 586.5 m² NLA |
| Use right | NSW LEC Consent Order 30 April 1997 · runs with land · 27 yr established |
| Zoning | E1 Local Centre · Bayside LEP 2021 · 34 m height · no FSR maximum · Rockdale TOD precinct |
| Tenancy | 9-yr triple-net to Black Fireflies OpCo · LOI executed · $480k pa Y2+ + CPI · PG + BG |
| Indicative MV | $5.7M – $6.5M · central $6.1M · 7.50% cap (internal credit memo) |
| HBU optionality | Class 5 medical conversion · TOD residential redevelopment · aggregation |
| Asset | Acquisition | Indicative MV | Strategy |
|---|---|---|---|
| Black Garter Rockdale (live) | $4.6M | $6.1M | Anchor · already operating |
| Site 2 — Sydney metro (East/North Shore) | $5–8M | $7–11M | Off-market warm-intro · distressed pref |
| Site 3 — Melbourne (VIC reform-eligible) | $3–5M | $5–7M | Pre-reform acquisition · reform uplift play |
| Site 4 — Sydney metro (West/SW) | $3–5M | $4–6M | Mortgagee / distressed acquisition |
| Site 5 — Sydney / regional NSW | $3–6M | $4–8M | Class 5 medical conversion optionality |
| 5-asset portfolio · stabilised | $18–28M deployed | $26–38M MV | ~6.5% blended cap (standalone) |
The standalone hold-to-stabilisation case returns 2.5–3.2× MoIC. The thesis-defining return profile, however, requires the Project SX-to-ASX hospitality trust roll-up — aggregating PBI's PropCo portfolio into a single ASX-listed REIT vehicle. Cap-rate compression from isolated 7.5% to institutional 6.0% (or tighter at the listing premium) is where the asymmetric return lives.
| Exit | Cap @ Exit | Portfolio MV | Equity Multiple | Investor MoIC | IRR (5-yr) |
|---|---|---|---|---|---|
| Standalone hold | 6.5% | $34–42M | ~3× | 2.5–3.2× | 22–28% |
| ASX rollup · base | 5.5% | $55–68M | ~5× | 5–7× | 38–48% |
| Stars-align · listing premium | 4.5% | $85–110M | ~10× | up to 12× | 60%+ |
| Term | Spec |
|---|---|
| Vehicle | Wholesale unit trust (s708 / s761G Corporations Act 2001 Cth) |
| Trustee | BG Holdings Trustee Pty Ltd |
| Minimum commitment | $250,000 (wholesale only) |
| Term | 7 years + 2 × 1yr extensions · early-exit pathway via rollup event |
| Distribution | Quarterly · preferred 8% then waterfall |
| Capital call | 30-day notice · staged deployment |
| GP commit | Sponsor co-invests 5% |
| Acquisition fee | 1% per asset · capped |
Why 0/8/20: aligns GP and LP. Zero management fee removes drag during build-out. Sponsor only earns on outperformance. Industry-standard 2/20 carries ~$1M/yr management drag on a $50M fund — we eliminate it.
| Risk | P × Impact | Mitigant |
|---|---|---|
| OpCo tenant covenant fails | 15% × HIGH | PG + BG security · alternate operator backstop · short re-lease cycle |
| Cap rate widens (rates rise) | 25% × MED | Triple-net preserves cash yield · long hold · refinance optionality |
| Regulatory tightening (NSW) | 20% × HIGH | Use rights run with land · grandfathered · LEC consent permanent |
| Asset class de-rating | 15% × MED | Class 5 medical HBU optionality · TOD redevelopment value |
| Banking de-risking | 30% × LOW | Asset-secured lending · multiple lender panel · non-Big4 primary |
| Sponsor key-person event | 10% × MED | Multi-party trustee · independent custodian · key-person insurance |
| Rollup event fails to materialise | 30% × HIGH | Standalone hold delivers 2.5–3.2× MoIC floor · rollup is upside not base requirement |
NDA signed → data room access (Box VDR) → Black Garter site visit → founder Q&A → trustee deed review → term sheet → first close. Target first close: Q3 2026. Direct questions to rio@black.industries.