Solander - Land & Opportunity Fund SPDS

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CFMG Land & Opportunity Fund ARSN 602 610 006Supplementary Product Disclosure Statement This Supplementary Product Disclosure Statement (‘SPDS’) supplements…
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CFMG Land & Opportunity Fund ARSN 602 610 006Supplementary Product Disclosure Statement This Supplementary Product Disclosure Statement (‘SPDS’) supplements the Product Disclosure Statement dated 29 November 2016 for the Trust issued by the Responsible Entity. Together, the PDS and this SPDS contain all of the information about the Offer of Class A Units (‘Solander Units’) in the Trust. Capitalised terms used in this SPDS have the meaning given to those terms as set out in the Glossary of the PDS.Custodian Equity and Income Funds Limited ACN 112 753 876 (Responsible Entity), the holder of Australian Financial Services Licence (AFSL) no. 291390, is the responsible entity of CFMG Land and Opportunity Fund ARSN 602 610 006 (Trust).C FMG LANDEQUITYINCOMEOverview The information presented below in this SPDS outlines an offer to acquire Solander Units in the Trust to facilitate the Trust investing in a minimum of 1,500,000 and in up to a maximum of 4,000,000 class A preference shares in Solander Syndicate Limited A.C.N 603 309 995 (‘Solander SPV’). The Solander Units have a targeted return of 12.0% per annum, which is based on the preferential rate of return on the class A preference shares to be issued by the Solander SPV less the Asset Identification and Negotiation Fee, Management Fee and administrative fees and costs we are entitled to be reimbursed for in operating the Trust. The preference shares issued by the Solander SPV to the Trust will have a fixed return of 15.2% per annum to fund up to $4,000,000 of the capital to the Property Development.The fixed return of 15.2% per annum is required to be paid on the redemption of the class A preference shares which is anticipated to take place at the end of the Property Development. Please note that whilst Solander SPV is required to make this 15.2% per annum payment the return is not guaranteed, is totally dependent on the successful completion and sale of the Property Development and therefore this investment should be considered highly speculative. The Solander Units have a targeted return of 12.0% per annum, which is based on the preferential rate of return on the class A preference shares to be issued by the Solander SPV less the Asset Identification and Negotiation Fee, Management Fee and administrative fees and costs we are entitled to be reimbursed for in operating the TrustThe Property Development relates to the purchase of real property, comprising three separate allotments, being a total of 11.431 hectares with developable area of approximately 10.31 hectares from the registered owners for $7,350,000 (excluding GST) with settlement due to take place on 28 February 2017.In the event the Solander SPV makes the preferential return on the class A preference shares then the Responsible Entity will waive payment of any fees and costs we are entitled to be reimbursed in the event the incurring of those fees and costs result in the Solander Units not achieving the targeted return of 12.0% per annumIt is proposed that the Property be developed into 179 residential allotments, supporting roads and other services generally in accordance with the Concept Plan in this SPDS.The specific risks associated with this investment are disclosed in this Supplementary Product Disclosure Statement.The development application for the Property Development was lodged with the Local Authority on 9 September 2016. The capital of up to $4.0m to be contributed by the Trust in exchange for the class A preference shares are to be applied to the costs associated with funding deposits paid to the registered owners, the costs associated with payment of stamp duty on the purchase contracts, the costs associated with carrying out due diligence, the costs associated with obtaining the development approvals and for working capital associated with the Property Development.2The Investment Proposal Solander UnitsThe Trust is offering a minimum of 1,500,000 and up to 4,000,000, Solander Units, to be issued at a price of $1.00 per unit, to raise up to $4,000,000, which the Trust will invest in the Property Development.Trust StructureThe Trust is a registered managed investment scheme. This SPDS relates to the Offer of Solander Units which will have a beneficial interest in class A preference shares to be issued by the Solander SPV to the Trust. The class A preference shares to be issued by the Solander SPV will carry a preferential rate of return of 15.2% per annum. The return is not guaranteed, is totally dependent on the successful completion and sale of the Property Development and therefore this investment should be considered highly speculative.Asset identification and negotiation fee4.4% of the capital raised by the issue of Solander Units will be paid to the Responsible Entity.Anticipated Distribution RateSolander Units are anticipated to have a distribution rate of up to 12.0% per annum (pre tax and net of fees) over the life of the investment. For the timing of distribution payments please refer to the table on page 10 of this SPDS. For example, for each $25,000 you invest in the Trust, the anticipated income distribution you will receive is $3,000 per annum. Payment of any distribution is totally dependent on the Trust receiving a return on the Solander SPV ‘A’ class preference shares held by the Trust.Minimum InvestmentApplications for Solander Units must be for a minimum investment of $25,000 and then in multiples of $5,000. The Responsible Entity reserves the right to accept lower amounts. The Solander Units will be issued for $1.00 each.Likely term of your InvestmentThe Property Development is currently anticipated to be completed by June 2019 . Accordingly, the Solander Units are intended to be on issue for a fixed term of three (3) years, however the directors of the Responsible Entity have the ability to: a. extend the term for an additional 12 months; or b. reduce the term provided that the Solander Units are on issue for twelve (12) months. Unitholders may not withdraw their investment before the end of the term (although transfers are permitted subject to the Constitution at the risk of the Unitholder).Income DistributionThe targeted return for the Solander Units is up to 12.0% per annum, which is based on the preferential rate of return on the class A preference shares issued by the Solander SPV less the Asset Identification and Negotiation Fee, Management Fee and administrative fees and costs we are entitled to be reimbursed for in operating the Trust. The Responsible Entity does not, and its related parties, associates, officers and employees do not, guarantee Unitholders will receive any, or a particular rate of, return on their investment. Interim distributions are intended to be paid in June 2017, June 2018 and June 2019 and a final distribution to be paid at the end of the completion and sale of the Property Development from the redemption proceeds of the class A preference shares paid to the Trust by the Solander SPV. The interim distributions are intended to be paid by the Trust retaining an amount from the subscription price for the A Class Preference Shares which will be applied progressively to make the interim distributions. Interim distributions will be made by electronic funds transfer to the Unitholder’s nominated Australian bank account. The final distributions for the financial years FY 19/20 (and FY 20/21 if the term is extended for an additional 12 months) will be totally dependent on Solander SPV complying in full and on time with its obligations under the terms of the A Class Preference Shares. A forecast Application, Sources, Income and Distribution Statement is set out on page 10 of this SPDS which has been prepared on the basis that capital of $4.0m is raised by the issue of Solander Units. The forecast Application, Sources, Income and Distribution Statement is provided for illustrative purposes only and is not represented as being necessarily indicative of the Trust’s future position or outcomes. Following the redemption of the class A preference shares by the Solander SPV the Trust will redeem Your Units by electronic funds transfer to the Unitholder’s nominated Australian bank account. Income distributions will only be made from realised income. Distributions will not be made from borrowings or unrealised gains.34DETAILS OF SOLANDER SPV (SPV DEVELOPER)The company and asset management fee:Solander SPV is a special purpose vehicle incorporated for the sole purpose of acquiring the Property and carrying out the Property Development.a. comprises an amount equal to 3% plus GST of the gross sales price received by the Solander SPV for any sale and/or similar transaction in respect of the Property; andSolander SPV was incorporated in Queensland on 10 December 2014 as a public company under the name Kinross Road Syndicate Limited. On 14 August 2015 its name was changed to Solander Syndicate Limited.b. is payable by the Solander SPV as lot sales are finalised.The Solander SPV currently has three directors serving on its board. Scott Watson, Graeme MacLaren and Jason Matigian. Details of each of these directors are set out in section 2 of the PDS The Solander SPV, pursuant to a management agreement, will draw on the resources of Custodian Land Syndicate Limited ACN 127 663 414 (‘Custodian Land’) for project management functions and administrative and company secretarial functions.DETAILS OF SOLANDER CORPORATE AND PROJECT MANAGEMENT Custodian Land provides management and administrative services to the Solander SPV and is also the project manager of the Property Development for the Solander SPV. Custodian Land will earn management fees as set out below. Project Management Fees The Solander SPV has agreed to pay Custodian Land a project management services fee in consideration for Custodian Land endeavoring to do all things it may deem necessary, prudent and desirable for carrying out the efficient, businesslike and proper management of the Property Development. The project management fee: a. comprises an amount equal to 2.0% plus GST of the gross sales price received by the Solander SPV from any sale and/or similar transaction relating to the Property; and a. is payable on the date of settlement of the sale by the Solander SPV of any allotment developed or created from the Property.Company Secretarial Services Fee The Solander SPV has agreed to pay Custodian Land a company secretarial services fee in consideration for Custodian Land endeavoring to do all things it may deem necessary, prudent and desirable for carrying out the efficient administration of the Solander SPVs secretarial affairs. The company secretarial services fee: a. is $60,000 plus GST per annum (on a pro-rata basis); and a. is payable monthly on a pro-rata basis in arrears. The Solander SPV must reimburse Custodian Land for any: a. disbursements paid or incurred by Custodian Land in the course of performing its duties under the management agreement; and b. disbursements or payments made by Custodian Land on behalf of the Solander SPV in respect of the acquisition of the Property, the capital raising and administration of the Solander SPV not otherwise covered by the management agreement. Custodian Land acts as the manager of a number of syndicated residential property development companies. Custodian Land draws from extensive experience as the manager of syndicated residential property development companies. The board of directors have backgrounds in banking, funds management and property development, and use this experience to assess opportunities based on location, population growth and demographics, infrastructure suitability, and community development plans. While Custodian Land has undertaken projects in the past, past performance is not an indication of future performance on similar projects.Company and Asset Management Services Fee The Solander SPV has agreed to pay Custodian Land a company and asset management services fee in consideration for Custodian Land endeavoring to do all things it may deem necessary, prudent and desirable for carrying out the efficient and proper management of the Solander SPV, the Property and the Property Development.5DETAILS OF SOLANDER PROPERTY DEVELOPMENT Overview The Solander SPV has contracted to purchase 11.431 hectares of land in Park Ridge, situated approximately 26kilometres south of the Brisbane CBD (‘Property’). It is intended that the Property be developed into 179 residential allotments, supporting roads and other services generally in accordance with the Concept Plan in this SPDS. The Locality Located 26 kilometres south of the Brisbane CBD, the Property Development is intended to provide a range of new housing opportunities. The surrounding area is characterised by rural residential, bushland, Claremont Resort over 50’s facility to the east and a number of new estates currently under construction. The Property has direct access to the Mount Lindsay Highway The Loganlea railway station is located within 8 kilometres to the north east and there are council bus services which operate within 4 kilometres to the north at Crestmead. The Property The Property comprises three separate allotments situated at 409, 415 and 429 Park Ridge Road, Park Ridge and is more particularly described as lots 1 and 2 on RP835896 and lot 1 on RP157662 having certificate of title reference numbers 18236212, 18236211 and 15731049. Market Demographics The Park Ridge Master Plan Area was adopted by Logan City Council in 2011 and sets out a clear plan for an integrated, well planned urban community and employment area with extensive environment, parks and waterway networks. This structure plan will form the basis for new communities which will bring quality dwellings along with new infrastructure and amenity. The Property forms part of this precinct structure plan. Almost $400 million of new infrastructure is currently under construction, planned or recently completed within the area and the Park Ridge catchment is forecast to grow by around 25,000 residents over the next 20 years, and see jobs growth of around 8,000 to 13,000. The Property has been identified to capitalize on these existing and future opportunities.Infrastructure A total of $394.3 million of major infrastructure projects are under construction, planned or recently completed across the Logan Local Government Area. The largest project in the planning is the $200 million Logal Central Master Plan which will be a purpose built precinct comprising commercial buildings, schools, retail, health and social services, along with retirement, aged care and residential buildings of five to eight storeys around a central town square. The recently completed expansion and refurbishment to the Logan Hospital have taken it from a 48 bed hospital in 1990 to a 316 bed hospital catering for the growing resident population and making it a significant employer in the area. In addition to this, infrastructure contributions associated with residential uses in the Park Ridge Master Plan could attract around $280 million which will be used to further enhance amenity and infrastructure in the area.6Purchase of the Property The contract to purchase 409 Park Ridge Road, Park Ridge between the Solander SPV and the registered owners was entered into on 2 February 2016. The key commercial terms of the 409 Park Ridge Road, Park Ridge contract are as follows: a. the contract for sale is due to settle on 28 February 2017; b. the price payable by the Solander SPV under the 409 Park Ridge Road, Park Ridge contract is $2,250,000.00; c. a non-refundable deposit of $225,000.00 was paid and released to the registered owners. The contract to purchase 415 Park Ridge Road, Park Ridge between the Solander SPV and the registered owners was entered into on 27 October2015. The key commercial terms of the 415 Park Ridge Road, Park Ridge contract are as follows:An ‘on site’ sales presence will be established together with the Solander SPV directly marketing allotments through a project web site, real estate marketing sites and other media campaigns. It is anticipated that marketing of the allotments will commence prior to settlement of the purchase of the Property and will continue during construction with allotments to be pre-sold subject to titles being created. While the Solander SPV anticipates that the above marketing and distribution strategy is appropriate the directors of the Responsible Entity or the Solander SPV are not able to forecast land sales prices or rates. Sales rates and selling prices can be influenced by a number of factors which are outside the control of either the Responsible Entity or the Solander SPV including property market conditions, supply and demand, interest rates and buyer sentiment. Concept Plan PARK RIDGE ROAD15.0532m435m2250 532m236.229.829.930.130.214.0 14.0 14.032.0 30.014.032.0 30.0407m212.5735m212.512.516.0351m2375m2375m2375m212.512.512.511.712.512.512.5375m2128304127303420m230115.030014.0125375m2450m230.034.9383m214.0 14.0287383m2283 284 285286375m2375m212.512.512.5475m216.112.512.512.515.214.0375m216.112.514.012.5280 279 278 277 276 275 274 375m236.6375m2375m230.7263 264 265 266 267 268 269 270 271384m2384m2384m2448m2384m2384m2273375m2449m214.0375m214.0375m230.0375m2384m2384m2384m227214.0281457m2420m212.530.026112.530.714.012.5420m2484m214.0288367m2 34.929928214.0367m230.712.528914.0420m230.0123375m214.012.5124375m2262383m2367m2475m216.1291475m229030.0375m234.929812.530234.9367m211.030.029714.0420m2 30.0126375m2375m2383m230.014.0 12.5420m229610.5420m211.012.530510.5420m230.0375m212.5375m214.0306 30.012914.0130420m212.5375m214.012.516.1295 294 293 29214.0375m214.0131375m216.011.0307375m2375m2472m210.530814.0375m210.512.5 30.0375m231711.030.0132472m2312 313 314 315 316375m212.5133394m2318375m230.0456m2375m230.0134350m2375m230.0351m2459m234.9 12.512.512.514.012.512.512.512.512.515.214.016.020930.0420m2210420m2211420m221230.0420m2213420m213.914.012.5214420m221530.0420m2216420m2217420m221830.0420m2219420m2220 420m222130.0420m2222420m2223420m222430.0420m2225420m2226420m222730.0420m2228420m2229420m223030.0420m2231420m2232420m223330.0420m214.014.014.014.0420m2247420m2420m230.3420m214.012.514.0241 240 239420m2375m2420m214.0238420m214.014.0237420m2 30.0245 244 243 242463m2236420m2235234 788m2507m217.519.036.715.724634.930.025114.030.0375m230.0375m230.0252375m230.0375m2309 310 31130.0253435m212.511.730.013526013.5453m2420m214.012.514.012.5 14.012.5255435m225412.512.5 14.0 12.5 12.5 12.5256435m2208435m214.012.5350m234.9257435m2400m230.0375m230.7258375m213.912.512.530.0408m212.5259435m2448m2137 326 325 324 323 322 321 320 319420m224813.5122488m2516m218.014.018.034.914.0121435m212.5435m212.512013.932.0407m234.911912.5330 331 332 333 334212.511.7 11.7 13.2 12.5 12.514.0 12.514.015.0116435m400m2475m2515m2214.030.012.530.012.530.0450m328230.012.5 34.9435m2A pre-lodgement meeting was held with the Logan City Council on 21 January 2016 and the development application was lodged on 9 September 2016.32714.014.013612.5The allotments proposed to be developed range from 300m2 to 600 plus m2 and are intended to be developed in three stages. The Property Development involves the development of the Property as residential allotments for on-sale as sites for residential housing.329420m216.014.934.9510m2435m2It is proposed that the Property be developed into 179 residential allotments, supporting roads and other services.14.0486m211820713.0The Concept Plan set out on this page illustrates the proposed development concept.16.034.7488m2The Development Concept472m14.0112486m2117435m233.0412m21382472m2111435m212.534.7433m2488m230.0375m213912.5109433m211514.014.0108486m2113417m212.512.5The deposits paid pursuant to the terms of the contracts of sale were paid by Custodian Land on behalf of the Solander SPV and
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