R56.8m of committed funding, of which R20.0m is at risk before the flagship proves itself. Base-case equity IRR of 18.6% and a money multiple of 2.23×.

21.1 Funding requirement

Table 61 Sources of funds

Table 62 Use of funds

21.2 Why this structure

• Equity in two tranches. The milestone at month 13, Rosebank at 75% occupancy, is the single most informative datapoint the business will generate. Releasing the second tranche against it means only R20.0m of equity is exposed to an unproven ramp, and it gives the investor a genuine decision point rather than a theoretical one.
• Senior debt at 21% of the funding stack. Modest gearing reflects the absence of hard asset security: leasehold improvements have limited realisable value on default. Higher gearing would improve the equity return but would breach the DSCR covenant in FY2030 in the base case, let alone the downside.
• Capital moratorium for 18 months. Debt service during the Rosebank ramp would consume cash the business does not generate until month 22. The moratorium costs additional interest and is the right trade.
• Asset finance for furniture and technology. These are the only assets with genuine collateral value, and financing them separately at a fixed rate releases senior capacity for fit-out, which cannot be financed on an asset basis.
• Landlord allowances at 16% of funding. These are the cheapest capital in the structure, they carry no interest and are effectively repaid through the rental over the lease term, and securing them is the principal commercial objective in each lease negotiation.
• A committed but undrawn revolving facility. It is not needed in the base case. It is needed in the downside case, and a facility arranged after a ramp disappoints is not a facility that will be arranged.

21.3 Debt serviceability

Table 63 Debt service and covenant metrics

21.4 Investment returns

Table 64 Base-case investment returns

21.5 Two valuations that do not agree

The discounted cash flow produces an enterprise value of R29.5m. The exit multiple produces R106.4m. The gap is large and it is not a modelling error, it is the honest consequence of a business whose cash flows are negative for three of the five projected years, so that a discounted cash flow at a 17.2% weighted average cost of capital places most of its value in a terminal year that has only just begun to perform.

Table 65 Unlevered free cash flow and the reconciliation between the two valuations (R million)

Table 66 Valuation bridge (R million)

21.6 Exit sensitivity

Table 67 Returns across the exit multiple range

Source: Company financial model. The base case assumes a 7.5× exit.

The Company’s own assessment, stated plainly: this opportunity does not clear a 20% private equity hurdle in the base case. It clears it at an 8.00× exit and above. It comfortably clears the 12–16% range typically applied by development finance institutions, family offices and property-sector investors, and it does so across the full range of exit multiples tested from 6.00× upwards. Section 24 sets out which investor profiles this opportunity suits and which it does not.

21.7 Site-level returns

Table 68 Return on capital by centre at stabilisation

Source: Company financial model. Contribution is stated before central overhead, depreciation, finance costs and tax, and payback is measured from the centre opening date rather than from financial close.

Each centre pays back its net capital in under three years at the contribution line, which is the correct measure of whether a site works. The gap between these site-level returns and the group equity IRR of 18.6% is accounted for by central overhead, the cost of the ramp periods, finance costs and the fact that the investor funds all three centres from month 1 while the third does not open until month 37.