valad opportunity fund no. 11

Transcription

Product Disclosure Statement
VALAD OPPORTUNITY FUND NO. 11
VALAD
OPPORTUNITY
FUND NO. 11
Valad Commercial Management Limited
ABN 76 101 802 046, ACN 101 802 046,
AFSL 223339 as Responsible Entity
for Valad Opportunity Fund No. 11
ARSN 108 693 876
An Offer to raise up to $27.294 million
at the Application Price of $1.01 per Unit
3 May 2007
Manager
www.vof.com.au
Valad Commercial Management
Limited, ABN 76 101 802 046,
ACN 101 802 046, AFSL 223339
Sole Arranger and Underwriter
National Australia Bank Limited
ABN 12 004 044 937,
ACN 004 044 937, AFSL 230686
> IMPORTANT NOTICE
Responsible Entity and issuer of this PDS
ABN 76 101 802 046, AFS Licence Number 223339
is the Responsible Entity of the Valad Opportunity
Fund No. 11 (ARSN 108 693 876) (“Fund”) and is
the issuer of this Product Disclosure Statement.
> CORPORATE DIRECTORY
jurisdiction outside of Australia. This PDS does
not constitute an offer or invitation in any place in
which, or to any person to whom, it would not be
lawful to make such an offer or invitation.
The distribution of this PDS in jurisdictions
outside Australia may be restricted by law and
persons who come into possession of it who
are not in Australia should seek advice on and
observe any such restrictions. Any failure to
comply with such restrictions may constitute
a violation of applicable securities laws.
This Product Disclosure Statement (“PDS”)
relates to the offer of up to 27.024 million Units
at a price of $1.01 each (“Offer”).
This PDS is dated 3 May 2007. This PDS is not
required to be lodged with ASIC. ASIC takes no
Disclaimers
responsibility for the contents of this PDS. You
Investments in the Fund do not represent
should only rely on the information in this PDS.
investments in, deposits with or other liabilities of
No person is authorised to give any information
NAB, Valad Property Group (“Valad”) or any other
or to make any representation in connection
member of the National Australia Bank or Valad
with the Offer which is not contained in this PDS.
Any information or representation not contained
groups of companies.
in this PDS may not be relied upon as having
None of the Responsible Entity, Valad, NAB
been authorised by the Responsible Entity in
and any of their respective directors, officers or
connection with the Offer.
associates stands behind the capital value nor
This is an important document that needs
guarantees the performance of the investment
your attention. If you are in any doubt as to how to
or the underlying assets in the Fund nor provides
interpret or deal with it, consult your financial
a guarantee or gives any assurance as to the
adviser.
performance of the investment, the repayment of
capital or any particular rate of capital or income
Electronic PDS
return.
This PDS may be viewed online on the Fund’s
website at www.vof.com.au or on National
The National Australia Bank group of companies
Australia Bank Limited’s website at
(NAB Group) may also provide debt, treasury
www.nabmarkets.com/valad.
and other services to the Fund or its controlled
If you access the electronic version of this PDS,
entities. These services are provided in various
you should ensure that you download and read the capacities as a third party provider and the NAB
entire PDS.
Group will act if necessary to protect its interests
A paper copy of this PDS is available free of charge ahead of those of Investors and other parties. In
to any person in Australia before the Closing Date
acting in its various capacities in connection with
of the Offer by telephoning NAB on 1800 652 669.
the Fund, the NAB Group will have only the duties
and responsibilities expressly agreed to by it in the
Up to date information
relevant capacity and will not, by virtue of acting
Information relating to the Offer that is not
in any other capacity, be deemed to have other
materially adverse may change from time to
duties or responsibilities or be deemed to owe a
time. This information may be updated and made
standard of care other than as expressly provided
available at www.vof.com.au or by telephoning
with respect to each such capacity.
NAB on 1800 652 669. A paper copy of any updated
information will be available free on request. It is
NAB (whether in its individual capacity, as
recommended that you review any such additional Underwriter, as Sole Arranger, as provider of
material before making a decision whether to
any debt facilities or treasury services or in any
acquire Units. If there is any material adverse
other capacity) does not accept any responsibility
change, a supplementary product disclosure
for any information or errors contained in,
statement will be issued.
or any omission from, this PDS and has not
Pictures of properties in this PDS
separately verified the information contained in
All pictures of properties in this PDS are actual
this PDS and makes no representation, warranty
pictures of the Properties unless stated otherwise.
or undertaking, express or implied, as to the
accuracy or completeness or suitability of the
Defined terms
information contained in this PDS.
Certain terms used in this PDS have been defined
Investments in the Fund are subject to investment
and the definitions are set out in the Glossary of
and other risks, including possible delays in
this PDS. Currency amounts are in Australian
dollars.
payment or loss of capital invested.
The information contained in this PDS is not
Offer restrictions
financial product advice. This PDS has been
The Offer is only being made to persons in
prepared without reference to your investment
Australia and to a limited range of persons in
objectives, financial situation and particular
some other jurisdictions to whom offers may be
made without the need for compliance with any
needs. It is important you read this PDS in its
registration, licensing or disclosure requirements
entirety before making a decision whether
in the relevant jurisdiction.
to invest. If you are in any doubt, you should
consult your broker or financial or other
No action has been taken to register Units or
professional adviser.
otherwise permit a public offering of Units in any
Issuer and Responsible Entity
Sole Arranger
ACN: 101 802 046: AFSL 223339
Level 33
500 Bourke Street
Melbourne VIC 3000
Responsible Entity of Valad Opportunity No. 11
(ARSN: 108 693 876)
Level 9
1 Chifley Square
Sydney NSW 2000
Directors of the Issuer
Stephen Day (Chairman)
Peter Hurley
Trevor Gerber
Bob Seidler
Andrew Martin
Auditors
PricewaterhouseCoopers
Darling Park Tower 2
201 Sussex Street
Sydney NSW 1171
Registrar
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
precinct.com.au
Underwriter
Level 33
500 Bourke Street
Melbourne VIC 3000
Solicitors to the Issuer
Mallesons Stephen Jaques
Level 61
Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Investigating Accountant
Deloitte Touche Tohmatsu
Grosvenor Place
225 George Street
Sydney NSW 2000
Information Line
NAB: 1800 652 669
www.nabmarkets.com/valad
> CHAIRMAN’S LETTER
It is my pleasure to invite you to become an investor in Valad Opportunity Fund No. 11
(“VOF” or the “Fund”). I am also pleased to invite existing Unitholders in VOF to remain in the Fund. The
responsible entity of the Fund is Valad Commercial Management Limited (“VCML”), a part of the listed Valad
Property Group (“Valad”). Valad is one of Australia’s leading property groups and has significant expertise in
managing third party equity capital. Valad has an established track record of delivering attractive returns to
investors from active property investment, development and management. This is evidenced by the weighted
average IRR of 26.5% (pre-tax and post fees and expenses) that Valad has delivered on all projects completed since
its inception.
The Fund will provide investors with the opportunity to invest in five development and value adding assets
located in New South Wales, Victoria and Queensland. VCML will actively manage each asset through
implementation of the appropriate repositioning, refurbishment or development strategy relevant to that
asset. Based on the target returns from these assets VCML is aiming for the Fund to meet or exceed a 17%
internal rate of return for Unitholders before tax and after fees and expenses.1 Indeed, Valad will only earn its
full performance fee if each project exceeds this 17% target.
The asset portfolio comprises:
> Melbourne International Airfreight Centre, Tullamarine, Victoria – an industrial refurbishment and
leasing opportunity
> Minchinbury Hometown, Western Sydney, New South Wales – a retail/homewares centre being
refurbished in advance of strata subdivision of the tenancies
> Oran Park, South-west Sydney, New South Wales – 107 hectares of land being positioned for rezoning
from rural to residential use prior to sale
> Richlands, Brisbane, Queensland – two development land sites covering 6.7 hectares in total, acquired with
a view to consolidation in advance of rezoning from future industrial to general industrial and subsequent sale
> Noosa North Shore, Noosa, Queensland – an interest in the development of 90 beach holiday homes with
masterplan approval already in place.
I believe that the Valad Opportunity Fund No. 11 presents a unique and attractive
opportunity for investors.
> An opportunity to earn higher returns than those which investors would normally expect to receive from
investing in a traditional property trust holding core assets with limited development/repositioning potential
> Distributions to be paid following realisations from projects throughout the life of the Fund, all of which
are expected to be completed within approximately three years
> The benefit of proven active property management from an experienced team with a strong track record of
performance. Valad has delivered a weighted average IRR of 26.5% for all projects completed since inception
(pre-tax and post fees and expenses)
> Valad’s interests are aligned with investors in VOF. Valad and its Directors will retain a significant holding
in the Fund, and Valad is incentivised to deliver the Target IRR via a performance-based fee structure.
This Product Disclosure Statement contains important information about the Offer, and it should be read in
its entirety. Please consult your licensed financial adviser or NAB in relation to any questions you may have
with regard to the Offer.
On behalf of the Directors of VCML I commend this offer to you.
Mr Stephen Day Chairman
1
This is not a forecast and should not be relied upon as such.
1
Valad Opportunity Fund Product Disclosure Statement
> WHAT YOU NEED TO DO
1
2
3
4
Read this
document
Please read this PDS in full, paying particular attention to
the Important Notice at the front of this PDS.
Consider
the Offer
All risk factors (and other information) concerning Units,
the Fund and the Properties need to be considered in light
of your own investment situation. Please pay particular
attention to the unlisted nature of the Fund and the
limited liquidity of Units. If you need more information
or clarification, you can contact NAB on 1800 652 669.
Consult
your adviser
Your financial, taxation or other professional adviser
is the best person to help you decide whether this
investment is right for you.
Complete the
Application Form
Should you wish to proceed with this investment, please
complete and return the Application Form accompanying
this PDS. The completed and signed Application Form
must be returned together with payment by cheque for
the full application amount. Cheques must be crossed
“not negotiable” and made payable to “Valad Commercial
Management Limited: Applications Account”.
As the minimum number of Units for each Application is
20,000, the minimum Application is $20,200 (20,000 Units
@ $1.01 per Unit).
The address for mailing the completed Application Form
with your cheque is:
5
Mail your
Application Form
and cheque
2
Valad Opportunity Fund No. 11
c/- Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
The completed Application Form and payment must be
received no later than 5.00pm (Sydney time) on the Offer
Close Date of 29 June 2007.
> KEY DATES
Product Disclosure
Statement date
3 May 2007
Offer opens
3 May 2007
Offer expected
to close*
29 June 2007
Allotment of Units
9 July 2007
VCML reserves the right, with the consent of the
Underwriter, to vary the dates set out above without
notice, including closing the Offer early, or extending
the Offer.
The Responsible Entity may, in consultation with
NAB, accept any application for Units in full, allocate
fewer Units than have been applied for (including
less than the stated minimum number), accept late
applications or decline any application. Where no
allocation is made, or where the number of Units
allocated is fewer than the number applied for,
the surplus application monies will be refunded,
without interest, after the Offer Close Date. Holding
statements will be forwarded to investors as soon
as practicable after the Allotment Date.
* Applications may be made at any time during the Offer Period.
Pending allocations on 9 July 2007, all application monies will be
held in an account established for this purpose, with any interest
forming part of the trust income
3
Potential exposure
to greater returns
4
VOF strong
performance
history >
Since establishment,
VOF has performed well,
completing and exiting
from three projects,
generating a weighted
average IRR of 27.4%
after all fees.
> Existing fund with a strong track
record of performance
> Alignment of interests through
co-investment by Valad
> Managed by an experienced
team with substantial property
investment, development and
funds management expertise
>Target pre-tax IRR for the Fund,
after all fees and expenses subject
to the risks set out in Section 6
5
> Three-year investment horizon
> VOF projects are diversified
across different market sectors
and geographical regions
> Diversification mitigates the risk
of being exposed to a single sector
or geographic region
1 > Melbourne International
Airfreight Centre, Tullamarine,
Victoria – an industrial asset
located near Melbourne
International Airport undergoing
refurbishment and leasing
2 > Minchinbury Hometown,
Western Sydney, New South
Wales – a retail/homewares
centre near the M4/M7 junction
in Sydney currently being
refurbished in advance of strata
subdivision of tenancies
3 > Oran Park, South-west
Sydney, New South Wales – 107
hectares of land being positioned
for rezoning from rural to
residential use prior to sale
6
4> Richlands, Brisbane,
Queensland – two development
land sites located 15 kilometres
from the Brisbane CBD covering
6.7 hectares in total, acquired
with a view to consolidation in
advance of rezoning from future
industrial to general industrial and
subsequent sale
5 > Noosa North Shore, Noosa,
Queensland – an interest in the
development of 90 beach house
holiday homes with Masterplan
approval already in place. Stage 1
of the development and sales
are underway with Stages 2, 3
and 4, due to be completed by
the end of 2009
7
> INVESTMENT SUMMARY
Responsible Entity
Valad Commercial Management Limited (“VCML”), which is a wholly owned subsidiary
of Valad Funds Management Limited. Valad Funds Management Limited (“VFML”) is part
of Valad Property Group (“Valad”), which is listed on the Australian Securities Exchange
(“ASX”) with a market capitalisation of over $1.7 billion and assets under management
of over $5.3 billion.
Fund strategy
VCML’s strategy for the portfolio is to complete the development and/or repositioning
of the assets and to dispose of the assets to realise greater net proceeds from sale than
costs incurred in the acquisition and development of each project taking account of the
Target IRR.
Asset portfolio
> Melbourne International Airfreight Centre, Tullamarine, Victoria
> Minchinbury Hometown, Western Sydney, New South Wales
> Oran Park, South-west Sydney, New South Wales
> Richlands, Brisbane, Queensland
> Noosa North Shore, Noosa, Queensland
Investment term
Expected to be approximately three years. Investors will be able to exit the fund three
and a half years following Allotment as detailed in Section 2.10.
Amount to be raised
Up to $27.294 million.
Underwriting
The offer is fully underwritten by NAB.
Application price per Unit
$1.01.
Minimum Application Amount
$20,200 being 20,000 Units at $1.01 per Unit.
Use of funds
Redemptions under the Withdrawal Offer, investment into the Noosa North Shore project
and issue costs.
Target IRR
At least 17% (pre tax and after all fees and expenses).2
Distributions
Distributions of capital and profits will be made within a reasonable time after the receipt
of proceeds from the sale of individual assets or parts of assets where those assets are
being sold piecemeal.
2
This is not a forecast and should not be relied upon as such.
8
Investment risks
The Fund has invested in property development and assets with an opportunity for
repositioning which, by their nature, carry a higher level of risk than investments in
completed and tenanted properties. Refer to Section 6 for more detail of risks associated
with an investment in the Fund.
Borrowings/debt
Projects are geared at the asset level.
Project gearing LVR ranges from 66% to 79% and averages 74% as at the date of this PDS.3
Pro-forma and Adjusted
NTA per Unit on Allotment
Pro-forma NTA per Unit on Allotment is $0.925.
Cornerstone investment
Valad, its Directors and their associated entities will hold at least 6,753,000 Units in the Fund,
and intend to retain this interest for the life of the Fund.
Liquidity
There is no formal liquidity offered during the Fund term with the exception of an exit
mechanism after three and a half years.
Adjusted NTA including estimated fair value of the properties is $0.953.
Units will not be quoted on any secondary market. Investors may sell their Units to a third
party by negotiation at any time.
Role of NAB
Sole Arranger and Underwriter.4
Fees and expenses
Management and other fees are payable by the Fund as described in more detail in Section 7.
Tax status
The Fund is a public trading trust for income tax purposes and will elect to be the head entity
of a consolidated group with effect from 1 July 2006. This means the Fund will be treated as
a company for all tax purposes, i.e. it will be liable to pay income tax at the company tax rate
(currently 30%) on its taxable income for each year, which will generate franking credits that
may be distributed to Unitholders. It is expected that all income distributions during the Fund
term will be fully franked. Potential investors should read the Taxation Report in Section 9.3
for further detail.
Labour standards,
environmental, social or
ethical considerations
VCML does not take into account labour standards, environmental, social or ethical
considerations in selecting, retaining or realising investments for the Fund, except to the
extent that such issues have an effect on the price or value of investments.
Cooling-off period
There is no cooling-off right for investors as the Fund will be an illiquid scheme.
Please read this PDS in its entirety, particularly Section 6.2 – Significant Potential Risks of the Fund. If you have any queries
on whether this investment suits your personal financial circumstances, please consult your financial adviser.
3
4
The LVR ranges stated do not include the investment in Noosa North Shore which itself is structured as a debt instrument rather than an investment in freehold land
and Oran Park for which debt is yet to be secured.
NAB is also a debt provider for the MIAC and the Noosa North Shore Projects.
9
> TABLE OF
CONTENTS
Important Notice
IFC
Chairman’s Letter
1
What You Need to Do
2
Investment Summary
8
Table of Contents
10
1. Overview of Valad Opportunity Fund No. 11
11
2. Details of the Offer
17
3. Development and Repositioning
of Property
22
4. Valad Property Group
26
5. Asset Portfolio
34
6. Investment Benefits and Risks
49
7. Fees and Other Costs
55
8. Financial Information
62
9. Experts’ Reports
10. Material Documents and
Additional Information
11. Glossary
12. Application Forms
Corporate Directory
10
68
109
119
122
IBC
> 1 OVERVIEW
OF VALAD
OPPORTUNITY
FUND NO. 11
11
> 1 OVERVIEW OF VALAD OPPORTUNITY
FUND NO. 11
1.1 Overview of the Fund
1.2 Fund Structure
Valad Opportunity Fund No. 11 is focused on generating
returns for investors through active development or
repositioning of property assets. Generally, the returns
from these types of property investments, where successful,
are higher than those an investor would normally expect
to receive from an investment in a traditional property trust
holding core assets with limited development potential.
VOF is an ASX listed property trust, for which trading in
Units is currently suspended pending the outcome of this
Offer. Following the close of the Offer, VOF will delist from
the ASX and continue as an unlisted property trust.
The Fund will have investments in five Projects across a
broad spectrum of property asset classes and geographical
locations. The investment strategy in place for each asset
is targeted towards maximising returns for investors.
The Fund is aiming to provide investors with a pre-tax,
post fees and expenses IRR of at least 17% (“Target IRR”).5
The Projects are outlined below:
> Melbourne International Airfreight Centre, Tullamarine,
Victoria (“MIAC”) – an industrial asset located near
Melbourne International Airport undergoing refurbishment
and leasing in preparation for sale in 2007
> Minchinbury Hometown, Western Sydney, New South
Wales (“Minchinbury”) – a retail/homewares centre near
the M4/M7 junction in Sydney currently being refurbished
in advance of the strata subdivision of its tenancies due for
completion in 2009
> Oran Park, South-west Sydney, New South Wales (“Oran
Park”) – 107 hectares of land being positioned for rezoning
from rural to residential use prior to sale estimated to
be completed by mid 2008
> Richlands, Brisbane, Queensland (“Richlands”)
– two development land sites located 15 kilometres from
the Brisbane CBD, covering 6.7 hectares in total, to be
consolidated in advance of rezoning from future industrial
to general industrial and subsequent sale which is scheduled
for the end of 2008
> Noosa North Shore, Noosa, Queensland (“Noosa North
Shore”) – an interest in the development of 90 beach house
holiday homes with masterplan approval already in place.
Stage 1 of the development and sales is in the process of
being completed with stages 2, 3 and 4, due to be completed
by the end of 2009.
5
This is not a forecast and should not be relied on as such.
12
VCML is the responsible entity for the Fund and the issuer
of Units offered under this PDS. VCML is a wholly owned
subsidiary of VFML, which together with Valad Property Trust
forms Valad Property Group, listed on the ASX with a market
capitalisation of $1.7 billion and assets under management
of over $5.3 billion. Valad has a strong track record of
delivering superior returns from property development and
repositioning.
A key element of the Fund’s structure is the appointment of
Valad Development Management Limited (“VDML”) (a wholly
owned subsidiary of VFML) as Development Manager for
all of the Projects, with the exception of Noosa North Shore
which is managed by the independent party who initially
sponsored the project. VDML actively participates in the
management of the Noosa North Shore project through
a Project Control Group structure and oversees all key
decisions made in relation to the project. The Responsible
Entity retains overall responsibility for the Fund’s operations
and is liable for the acts of agents and delegates that
it appoints in connection with the Fund, including the
Development Manager.
The Fund’s interests in the properties are held in special
purpose trusts or companies which are 100% owned
by the Fund with the exception of Noosa North Shore.
This is depicted in Figure 1.1.
Figure 1.1 VOF Structure
100%
100%
Valad Property Group
19.9%* holding
VCML
“Responsible Entity”
Master Development
Management Agreement
VDML
“Development Manager”
Responsible
Entity
External Investors
80.1% holding
VOF
“the Fund”
Richlands
Minchinbury
Oran Park
MIAC
Noosa North Shore
* Includes Directors’ holdings. Maximum allowable given stamp duty restrictions.
1.3 Fund History
In 2004 Valad established VOF as a listed property trust with
the strategy of investing opportunistically in the acquisition,
development, repositioning and on-sale of properties. VOF
was listed on the ASX on 6 July 2004 following a successful
capital raising of $33 million.
Since listing on the ASX, VOF has performed well at an asset
level, achieving a weighted average pre-tax IRR of 27.4%
(after all fees and expenses) on the projects completed prior
to the date of this PDS.6 However, as the Fund has developed,
VCML has formed the view that the size of the Fund and the
nature of the development style earnings are not well suited
to the listed environment. Accordingly, VCML made the
decision to convert VOF into an unlisted investment vehicle
with an expected life of three years. This was announced
on 9 March 2007. Existing Unitholders in VOF have the
opportunity to either redeem their Units by participation in
the Withdrawal Offer or to remain in VOF.
6
The Fund will retain and continue the development and
repositioning of four of its five existing assets, and will
acquire an interest in Noosa North Shore as an additional
investment. VOF’s existing interest in Erskine Park will be
sold, as the strategy for this property has changed. VCML
is of the opinion that Erskine Park is now better suited to a
“develop and hold” strategy which no longer fits within the
Fund’s mandate.
VOF Units have been suspended from trading on the ASX
and will remain suspended throughout the Offer. VOF will
be converted into an unlisted trust immediately following
the successful completion of this Offer and allotment of
the Units to new investors in the Fund. If the Offer is not
successful, the suspension of trading will be lifted and
trading on the ASX will recommence.
This IRR calculation does not include the IRR attributed to Erskine Park which is an unfinished project. The strategy for Erskine Park has changed and as
a result no longer fits within VOF’s mandate. Erskine Park will be sold at market value, equal to its accumulated cost, as part of the recapitalisation of VOF.
The transaction value will be supported by two independent valuations. The IRR including Erskine Park is 21.1%.
13
FUND NO. 11
1.4 Fund Strategy
The strategy of the Fund is to generate attractive returns
from the Projects in the Fund by implementing the
appropriate development, repositioning or refurbishment
strategy for each asset as detailed in Section 5. The
Valad management team has an excellent track record
in delivering superior returns from active property
management and this expertise will be applied to the Asset
Portfolio with the objective of maximising equity returns
whilst preserving and protecting investor capital.
Valad is an ASX listed specialist property investment,
development and funds management group with a
market capitalisation of more than $1.7 billion with over
$5.3 billion of assets under management. Valad has over
12 years experience in the development, repositioning and
management of property assets.
Valad’s Performance History
Since inception in 1995, Valad has completed property
repositioning and development projects with an end value
of $1.3 billion comprising:
As the Projects are sold, the capital and profits arising will
be returned to Unitholders within a reasonable timeframe
after receipt of the sale proceeds. The progressive return
of capital will have the effect of reducing Unitholders’ equity
in the Fund over time.
> 13 office development, repositioning or refurbishment
projects
> 8 industrial projects including land subdivisions,
developments and refurbishments
1.5 Relevant Experience of the Valad
Property Group
> 4 residential developments
> 5 retail developments and one retail refurbishment and
repositioning
Importance of Relevant Experience
> 5 mixed use developments.
The capability and experience of Valad is important to the
Fund, as the Asset Portfolio comprises Projects in need of
development and repositioning, which require more active
management than passive property investment.
The weighted average pre-tax IRR (post fees and expenses)
for all of the above activities was 26.5%.
Figure 1.2 shows the level of IRR performance achieved
across different asset classification categories.
Figure 1.2 Valad IRR Performance on Completed Projects
Weighted Average IRR by Asset Category
43.9%
38.1%
27.4%
27.1%
23.1%
26.5%
15.9%
VOF
Office
Industrial
14
Retail
Mixed Use
Residential
Average IRR
The following important factors should be noted in relation
to the previous performance of Valad’s projects:
> IRR is not the annual yield on equity that investors receive.
It is measured over the life of an investment and includes
capital growth. For a definition of IRR refer to the Glossary
in the back of this document
> IRR is generally enhanced by the use of debt financing,
due to the return on equity capital being greater when
combined with the use of debt
> Investment in the Fund will be subject to a number of risk
factors including those outlined in Section 6.2
> The past performance of these projects is in no way an
indication of the future performance of the Fund.
1.6 VOF’s Performance History
Since establishment, VOF has completed and exited from
three projects, generating a weighted average pre-tax IRR
of 27.4% after all fees and expenses.7 The three projects are
detailed below:
2 Richardson Place, North Ryde, NSW
One of the original seed assets in VOF, 2 Richardson Place
was an A-grade suburban office project with net lettable
area of 15,220 square metres and 503 car spaces. At the
time of acquisition the property was under construction with
a pre-lease commitment in place for 37% of the building.
The strategy for the project was to:
> complete construction on time and within budget
VOF actively managed the construction and development
of the property, improving the leasing position to 53%. In
October 2005, VOF sold its interest in the property to Valad
for $68.5 million which was based on two independent
valuation reports obtained by VOF in order to determine and
substantiate a fair value for the property. This represented
a pre-tax, post fees and expenses IRR of 20.3% on the
transaction.
Summary of Transaction
Acquisition price
$33.0 million
Sale price
$68.5 million
IRR
20.3%
> lease the vacant space
> implement appropriate property management systems
> sell the property at a time when it was substantially
leased, and VOF had secured the benefit of improving rentals
and proposed new infrastructure in the immediate vicinity.
7
This IRR calculation does not include the IRR attributed to Erskine Park which is an unfinished project. The strategy for Erskine Park has changed and as
a result no longer fits within VOF’s mandate. Erskine Park will be sold at market value, equal to its accumulated cost, as part of the recapitalisation of VOF
which will be supported by independent valuations. The IRR including Erskine Park is 21.1%.
15
FUND NO. 11
Regency Green, Regents Park NSW (50%)
Pitt Street Portfolio NSW (50%)
Regency Green was acquired by VOF at the time of its initial
public offering under a joint venture arrangement with VFML.
Regency Green was a 25.1 hectare site offering a proposed
industrial land subdivision 20 kilometres west of the Sydney
CBD. At the time of acquisition, 58% of the land lots were
under conditional sale agreements. The strategy for the
project was to:
In August 2004, VOF purchased a 50% interest in three
B-grade commercial office buildings at 51 Pitt Street,
37 Pitt Street and 6 Underwood Street in the Sydney CBD,
in joint venture with Valad. These three buildings comprised
total net lettable area of 20,400 square metres and are
located in a strategic position within the Sydney CBD in close
proximity to Circular Quay. The strategy for these buildings
was to:
> secure authority approvals (to remove conditionality
and permit the unconditional sale of the balance of the lots)
> secure purchasers for the remaining uncommitted lots
> refurbish and upgrade the services and finish of
each building
> construct infrastructure to service the land subdivision
> undertake a leasing program to attract new tenants
> settle the sale of individual lots once titles had been
issued by the government Land Titles Office.
> prepare the buildings for sale.
Infrastructure and civil development works were completed
by mid 2005, and sales were completed by December 2005.
For its 50% interest, VOF generated a pre-tax, post fees and
expenses IRR of 22%.
The joint venture managed the strategic refurbishment,
repositioning and leasing of the portfolio, following which the
portfolio was sold via a public auction at a value significantly
higher than the acquisition price.
Acquisition price
Acquisition price
$23.9 million
Sale price
Sale price
$37.4 million
IRR
IRR
22%
16
$80.2 million
$121.4 million
32%
> 2 DETAILS
OF THE OFFER
> 2 DETAILS OF THE OFFER
2.1 Delisting of the Fund
2.4 Property Mix Flexibility
The Fund is a registered managed investment scheme
established in 2004 which was listed on the Australian
Securities Exchange on 6 July 2004 under the ASX code
VOF. The Fund proposes to delist from the ASX following
completion of a withdrawal offer under Part 5C.6 of the
Corporations Act to existing Unitholders (“Withdrawal
Offer”). The Withdrawal Offer is conditional upon the
successful completion of the Offer. Once delisted, the
Fund will continue as an unlisted development fund
with an expected life of three years.
VOF will realise the value of its investment in Erskine Park
under an irrevocable offer granted by the Valad Property
Trust. Erskine Park is an existing but as yet unfinished
project in which VOF is a minority joint venture participant
(36% interest but holding a 50% voting interest). The strategy
for Erskine Park has changed and as a result no longer fits
within VOF’s mandate. VCML is of the opinion that Erskine
Park is now better suited to a “develop and hold” strategy.
Under the irrevocable offer, the Fund’s interest will be sold
at market, for approximately $7.9 million, which will be
supported by two independent valuations. Further details
on the irrevocable offer can be found in Section 10.3.
The public offer of Units to new investors comprises
the Offer under this PDS.
2.2 Existing Unitholders
Existing Unitholders have the option of either redeeming
their Units as part of the Withdrawal Offer or doing nothing
and continuing as Unitholders in the Fund. Existing
Unitholders should refer to the Withdrawal Offer which has
been provided to them, and contact their financial or other
professional adviser should they require further advice.
Existing Unitholders may apply for further Units pursuant
to the Offer.
2.3 Units Available for Subscription by New
Investors
This Offer is for up to 27.024 million Units at an Issue Price
of $1.01 per Unit, raising total Offer proceeds of up to
$27.294 million.
The total amount of the capital raising is dependent upon:
> the number of Unitholders in VOF who elect to
redeem their Units under the Withdrawal Offer
> the amount of capital invested by VOF in Noosa
North Shore.
The Offer under this PDS will raise the amount required
to satisfy redemptions under the Withdrawal Offer, plus
provide sufficient capital to meet the costs associated with
the Offer and the net investment in Noosa North Shore (after
accounting for the proceeds from the sale of Erskine Park).
As a result, the number of Units to be issued pursuant to this
Offer may be less than the maximum of 27.024 million Units.
18
In addition, VCML has entered into a Call Option with Valad
to purchase an interest in another project, Noosa North
Shore. On acquiring all of Valad’s interest in the Project,
VCML will allocate a portion of its interest to VOF up to a
maximum value of $10.1 million. The interest allocated
to VOF will depend on the level of redemptions under the
Withdrawal Offer.
Further details on the structure of VOF’s proposed
investment in Noosa North Shore can be found in
Section 5.2.5.
2.5 Expected Level of the Capital Raising
It is not possible to determine the exact level of redemptions
under the Withdrawal Offer, and consequently the number
of Units that need to be issued under this Offer, prior to the
close of the Withdrawal Offer.
In order to understand the Offer range needed to fund
redemptions under the Withdrawal Offer, the Responsible
Entity has examined the register of Unitholders and been
able to determine those investors who:
> are likely to accept the Withdrawal Offer (namely those
investors who usually do not hold unlisted Units under their
investment mandates); or
> have indicated that they wish to remain in the Fund
(including Valad and its Directors).
From this analysis, the Responsible Entity has been able
to determine with a reasonable level of certainty the likely
maximum (“High Capital Raise”) and minimum (“Low Capital
Raise”) amount of the capital raising. It has also estimated an
“expected” level of redemptions under the Withdrawal Offer.
Utilising the flexibility afforded to it under the Call Option
agreement for the Noosa North Shore investment, the
Responsible Entity has been able to determine that
the capital raising will fall within the $22.570 million
to $27.294 million range and is targeting a raising of
$26.164 million based on its anticipated level of redemptions.
The variance in capital raised, the anticipated level of
redemptions under the Withdrawal Offer and the size of the
investment in Noosa North Shore are indicated in the table
below. This analysis is further detailed within the Source
and Application of Funds table in Section 8.1.
Issue of Units to investors
under this PDS
Redemption of Units under
the Withdrawal Offer
Investment in Noosa
North Shore
LOW
CAPITAL
RAISE
$’000
HIGH
CAPITAL
RAISE
$’000
EXPECTED
CAPITAL
RAISE
$’000
22,570
27,294
26,164
16,031
27,294
21,180
10,100
3,800
8,800
2.8 Potential Scale Back of New Investors
In the event that a greater number of applications are
received than are required, the Responsible Entity will
endeavour to fulfil applications on the basis of giving priority
to those investors who lodged their Application Forms
together with application monies first. The Responsible
Entity and Underwriter retain the right to accept applications
in full, to reject applications, or to scale back applications
and accept for a lower amount than that applied for.
2.9 Minimum Application
The minimum number of Units that can be applied for under
this Offer is 20,000 requiring minimum application funds
of $20,200.
2.10 Liquidity and Exit Mechanism
Investors should view an investment in the Fund as illiquid.
2.6 Offer Is Underwritten
NAB has underwritten the Offer to the level of $27.294
million. Subject to the terms of the Underwriting Agreement,
the Underwriter will subscribe for any shortfall in
applications for Units. Material terms of the Underwriting
Agreement, including the circumstances in which the
Underwriter may terminate its obligations, are detailed in
Section 10.3.
If the Underwriting Agreement is terminated no Units will
be issued and the Withdrawal Offer will not be completed.
2.7 Issue Mechanics
It is currently anticipated that Allotment of new Units will
occur on 9 July 2007.
The Withdrawal Offer will close approximately one week
prior to the close of the PDS offer period and redemption
monies will be paid promptly following the issue of new
Units in the Fund, but no later than 21 days after the close
of the Withdrawal Offer.
The Units will not be listed on the ASX or any other secondary
market. Investors may transfer or sell their Units at any time
provided they are able to locate a purchaser and negotiate
a sale price. Any transfer of Units is subject to the Fund
Constitution, including the investor bearing any costs and
stamp duty associated with such a transfer. The Responsible
Entity may refuse to register a transfer of Units at its
absolute discretion.
To the extent that any Projects remain incomplete at a date
three and a half years after the Allotment of Units under
this Offer, then VCML will offer an exit mechanism to all
Unitholders on the following basis:
> If the NTA per Unit is less than 10 cents, then VCML will
either offer to redeem all Units, transfer all Units to Valad
or the Fund would be terminated. Proceeds received by
Unitholders will be based either on independent valuation
of the assets or actual sale prices
> If the NTA per Unit is 10 cents or greater, then VCML
will consider the Fund’s position, and depending on what
it considers to be in the best interests of Unitholders it
will either:
– redeem all Units, transfer all Units to Valad or the Fund
would be terminated. Proceeds received by Unitholders
will be based either on independent valuation of the assets
or actual sale prices; or
19
> 2 DETAILS OF THE OFFER
– make a recommendation to Unitholders to vote
by ordinary resolution on whether to extend the life
of the Fund. However in doing so Valad will still provide
Unitholders with a means of exiting at value at that
point in time.
If Valad purchases any assets of the Fund as part of a winding
up of the Fund then it will do so in accordance with the
Constitution and VCML’s Conflict Management Strategy.
2.11 Distribution Policy
Distributions of capital and income will be made upon
the receipt of proceeds from the sale of individual Projects,
after provision for taxation and liabilities.
2.12 Debt Funding
There will be no borrowings at the Fund level. Borrowings
are instead made by the vehicles which own the assets of
each Project. As such, financiers will not have recourse
to any other assets of the Fund, only to the assets of the
particular borrowing entity.
2.13 Expected Life of the Fund and Exit Strategy
for Unitholders
The expected life of the Fund is dependent upon the time
it will take to complete the Projects. During or at the end
of each Project the properties and associated assets will
be sold and all profits and capital (after all fees, expenses
and taxes) will be distributed to Unitholders in proportion
to their Unitholdings.
The anticipated life of the Fund is three years, representing
the estimated time to complete the Project of longest
duration. In the event that all of the Projects are not
completed by this time then an exit mechanism will be
available to investors as outlined in Section 2.10 above.
2.14 Reports to Investors
VCML anticipates providing Unitholders with quarterly
reports detailing the performance of the Fund and updating
Unitholders on progress of the Asset Portfolio. VCML will
also provide annual audited accounts for the Fund.
VCML will provide Unitholders with notification of distribution
payments in advance of those payments being made,
including the amount of franking of distributions.
20
2.15 Tax Implications for Investors
The Fund should be classified as a public trading trust for
the purposes of the Income Tax Assessment Act and will
elect to be the head entity of a consolidated group with effect
from 1 July 2006. This means the Fund will be treated as a
company for all tax purposes. The effect of this is:
> the Fund is considered to be a separate taxable entity
from its investors and is liable to pay Australian income
tax at the corporate rate (currently 30%) on its net income
> the Fund will receive franking credits for the amount
of tax paid and these will be used to frank distributions
to Unitholders.
Unitholders should only be subject to tax on the distributions
they receive. To the extent these distributions are
distributions of capital, no amount should be assessable
to the Unitholder, but rather the cost base of their Units in
the Fund will be reduced. To the extent these distributions
are distributions of income, the amount received (together
with any franking credits attaching to the distribution) will
be included in Unitholders’ taxable income. The franking
credits may in turn be used to reduce the income tax payable
by Australian resident tax paying Unitholders. It is expected
that all income distributions during the Fund’s remaining
term will be fully franked.
A summary of the income tax implications applicable to
investors is outlined in the Taxation Report contained in
Section 9.3. The advice is general in nature and prospective
investors should seek their own professional taxation
advice in relation to their own position.
2.16 How to Apply for Units
Investors must complete and return an Application Form
together with the application monies before the Offer
Close Date.
Applications for Units can only be made by completing the
Application Form accompanying this PDS or attached to the
electronic version of this PDS which can be obtained from
the VOF website at www.vof.com.au or NAB’s website at
www.nabmarkets.com/valad. The Application Form must
be completed in accordance with the instructions set out in
Section 12 of this PDS and on the reverse of the Application
Form. Application Forms must be accompanied by a cheque
made payable to “Valad Commercial Management Limited:
Applications Account” and crossed “not negotiable” in
payment for the Units in the Fund that are the subject of
that application.
Your Application Form and cheque should be sent to:
2.18 Electronic Offer Document
c/- Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
This PDS may be viewed online at www.vof.com.au or
at www.nabmarkets.com/valad. Applicants using the
Application Form that accompanies the electronic version
of this PDS must be located in Australia. Persons who
receive the electronic version of this PDS should ensure
that they download and read the entire PDS.
A completed and lodged Application Form, together with
payment for the number of Units applied for, cannot be
withdrawn except as permitted by law and, when accepted,
constitutes a binding commitment for the number of Units
specified in the Application Form or such lesser number
of Units allocated to the Applicant on the terms set out in
this PDS.
Application Forms must be received by the Offer Close Date.
The Responsible Entity, with the consent of the Underwriter,
reserves the right to extend or shorten the Offer Period.
If the Application Form is not completed correctly the
Responsible Entity has absolute discretion to reject the
Application Form, or treat it as valid and construe, amend
or complete the Application Form as it deems appropriate.
2.17 Privacy Information
By completing the Application Form that accompanies
this PDS, you are providing personal information to VCML
for the primary purpose of VCML providing this investment
product to you. VCML may use the personal information
contained in your application form for related purposes such
as administration and providing services to you in relation
to your investment in the Fund. Administration includes
monitoring, auditing, evaluating, modelling data, answering
queries and providing services in relation to the investment.
If you do not provide the information requested in the
Application Form, your application may not be able to
be processed.
VCML may share your personal information with external
service providers and other entities in Valad for the purpose
of their providing services such as register keeping, postage,
administration, etc. to the Fund and its Unitholders. We will
also send you information on new investment offers unless
you advise us not to do so. Please contact us on 1800 825 231
(1800 VALAD1) if you do not consent to us using or disclosing
your personal information in these ways. You may view
Valad’s privacy policy at www.valad.com.au.
You may request access to your personal information that
VCML or an external service provider holds in relation to
your investment by writing to VCML at the address in the
Corporate Directory.
A paper copy of this PDS will be provided free of charge
to any person who requests a copy by contacting Valad or
NAB by mail or in person, during the period of the Offer.
You should follow the instructions of your financial adviser
in making your application. It is important to read the entire
PDS before applying for Units.
2.19 Overseas Investors
This PDS does not constitute an offer in any jurisdiction
in which, or to any person to whom, it would not be lawful
to make such an offer. No action has been taken to register
or qualify the Units or the Offer or otherwise to permit an
offering of the Units in any jurisdiction outside Australia.
Accordingly, the distribution of this PDS in jurisdictions
outside Australia is limited and may be restricted by law.
Persons who come into possession of this PDS who are
not in Australia should seek advice on and observe any such
restrictions. Any failure to comply with these restrictions
may constitute a violation of securities laws.
2.20 No Cooling-off Period
As the Fund will invest in real estate, which is not liquid for
the purposes of the Corporations Act, there will not be a
cooling-off period for Applications.
Consequently, by submitting an Application Form, you will
be deemed to have applied for the number of Units for which
payment is made. Once an Application has been accepted it
cannot be withdrawn.
2.21 Investor Enquiries
This document is important and should be read in its entirety.
If you are in doubt as to the course you should follow, you
should consult your financial adviser.
Questions relating to the Offer can be directed to NAB on
1800 652 669 (local call cost), or your financial adviser.
For further contact details, please see the
Corporate Directory.
21
> 3 DEVELOPMENT
AND REPOSITIONING
OF PROPERTY
Property Repositioning
3.1 Creating Value from Property Development
and Repositioning
Property Development
Property development is the process of acquiring a property
asset, making substantial physical changes to it and selling
the asset at a profit.
The property development process generally involves:
> locating a suitable site for development
> designing a concept development
> determining if the development is feasible
> purchasing the property and arranging finance
Property repositioning is the process of acquiring a property
asset that is generally under priced by the market, making
improvements to it and selling the asset at a profit. Typically,
property repositioning involves lesser physical changes than
property development, which usually involves construction
of a new building or major renovations.
Property assets can become undesirable to both tenants
and investors because of, for example, inactive property
management, lack of maintenance, an unattractive lease
profile, or poor building services such as air-conditioning
and lifts.
Addressing the building’s shortcomings through relatively
minor building works and active property management can
make it more attractive to investors and tenants and thereby
improve the value of the property.
> applying for relevant authority permits
> construction or subdivision
> marketing the project
> securing tenants (if applicable)
> disposal of the property for net proceeds greater than
the total acquisition and development cost.
Figure 3.1 Value Creation from Property Development
Expected increase
in property value
Expected property value
Value creation
from development
Accumulated costs of
each stage of development
Initial
feasibility
Property
acquisition
Concept
design and
town planning
Construction
or subdivision
Property
marketing
Secure tenants
(if applicable)
Property
disposal
Typical stages of property development
23
> 3 DEVELOPMENT AND REPOSITIONING
OF PROPERTY
In various circumstances, land and property may not be
positioned to capitalise on its highest and best use due
to factors such as town planning restrictions. By actively
managing the process to rezone land or obtain planning and
development approvals for changed uses, the value of the
relevant land and property can be materially improved and it
may be opportune to exit the investment at this point in order
to maximise the IRR return rather than continuing to invest
further capital for the longer term. Oran Park and Richlands
are an example of this strategy.
> improving the internal and external appearance of
the property
The techniques used to reposition an asset depend on
whether it is an office, industrial, residential or some other
type of property.
> leasing vacant space (if applicable)
However, repositioning generally involves some or all of
the following work:
> possibly increasing the lettable area of the building.
> rezoning land to support higher and better use
> removing restrictions/limitations over the land
> improving property facilities and infrastructure to meet
current and prospective tenants’ accommodation needs
> improving the space utilisation of the property
> maintaining available revenue streams during
repositioning to limit funding requirements
> renegotiating with tenants so that leases are longer
and/or at rents reflecting current market
> improving the extent to which the building complies
with government regulations
Property development and property repositioning are
inherently riskier than passive property investment but
generally provide superior returns. See Section 6.2 for
further information on risks.
Figure 3.2 Value Creation from Property Repositioning
Expected increase
in property value
Expected property value
Value creation
from repositioning
Accumulated costs of
each stage of repositioning
Initial
feasibility
Property
acquisition
External and
internal upgrade or
land rezoning
Marketing of
repositioned property
Typical stages of property repositioning
24
Renegotiation of
current leases and
leasing of vacant space
3.2 Factors Driving Property Development
and Repositioning Opportunities
Property development and repositioning opportunities are
generally driven by changes in the requirements of occupiers
and investors, and broader changes in land use patterns
over time. Some of the factors that may contribute to these
changes include:
> businesses placing an increased emphasis on managing
occupancy costs
> changes in the importance of the presentation of premises
> changes in the composition of the Australian labour force
and the consequent need for businesses to relocate to areas
convenient for labour
> change in production and distribution methods affecting
space requirements
> demographic and lifestyle changes which may create a
need for new types of commercial and residential buildings
> changes in the community and transport infrastructure
> degradation of existing buildings
> increasing environmental, social and community
standards (for example environmental regulations) affecting
the viability and utility of older building stock.
VCML will continue to consider these dynamics when
reviewing opportunities to further enhance value for
the Fund’s investors from property development and
repositioning of the Asset Portfolio during the life of
the Fund.
The property development sector is highly competitive
and requires a disciplined approach for consistent success.
Valad has an established record of accomplishment in
active property investment and development management.
For further details see Sections 1.5 and 1.6.
25
> 4 VALAD
PROPERTY
GROUP
4.1 Valad Property Group
Valad is a specialist property investment and funds
management group founded in 1995. Valad listed on
the ASX in 2002 and now has a market capitalisation
of more than $1.7 billion and $5.3 billion of assets
under management.
Valad brings together experience in the development and
management of a broad range of Australian and international
property assets and investment vehicles.
Since 1995, Valad has managed and invested funds on behalf
of investors with exposure to property investments whose
value, when combined with the expected end value of current
projects and investments, exceeds $6.5 billion. Investments
have ranged from greenfield developments, through to
the refurbishment of existing assets and their divestment
after renegotiating leases and improving management,
to investment in passive property assets. Market sectors
have included commercial offices, business parks,
industrial estates, data centres and multi-unit residential
developments.
The Board of VCML has extensive property and commercial
experience, the details of which are summarised below.
The Board of Directors of VCML has appointed Wendy Boxall
(detail of experience in Section 4.5 below) as Fund Manager
of VOF.
4.2 Key Investment Criteria for the Asset Portfolio
Valad follows an intensive investment process when
choosing suitable assets to be acquired for its funds or
managed entities, which reflect the investment mandate
and risk profile of the underlying entity. This is the same
investment process that VCML has undertaken in choosing
the Asset Portfolio for the Fund.
The Projects comprising the Asset Portfolio were each
selected following detailed feasibility studies taking account
of the Target IRR.
As noted earlier, VCML is the responsible entity of the Fund.
VCML is also the responsible entity of Valad Property Trust.
The Development Manager of the Fund is Valad Development
Management Pty Limited (“VDML”). VCML and VDML are
wholly owned subsidiaries of Valad.
27
> 4 VALAD PROPERTY GROUP
The following process map demonstrates the investment and project implementation processes of Valad and the Fund.
Figure 4.1 Valad Investment Evaluation and Implementation Process
Project Acquisition and Approval Process
Negotiation with Vendor
Project Identification
Preliminary Investment Review
Due Diligence
Project Investment
Approval and Acquisition
Development or Repositioning Activity
> Continual review of market
fundamentals
> Financial due diligence
> Establish project team
> Compile due diligence findings
> Funding structure
> Target identified markets
> Estimate project costs and
revenue
> Environmental and technical
review
> Prepare Final Investment
Proposal (“FIP”)
> Initial market assessment
> Preliminary discussions with
tenants
> Negotiate final acquisition
terms
> Initial concept design
> Detailed costing
> Initial review of planning
> Instruct independent valuation
> Finalise property and legal
due diligence
> Highlight key risks
> Full market assessment
> Finalise funding structure
> Pipeline Review Meeting
> Preliminary feasibility
> Complete acquisition
> Determine if project meets
Fund mandate and required
returns
> Legal review
> Identify due diligence costs
> Finalise project design
> Prepare Preliminary
Investment Proposal (“PIP”)
> Agree funding structure
> Access opportunities through
Fund Manager’s networks and
activities
> Identify key risks and possible
returns
> Identify opportunity to pursue
> Board approval of due diligence
costs
> Refine feasibility and cash flow
model
> Identify alternative exit
strategies
> Analyse risk/return
Board Approval Process
Board Notified of Opportunity
Board Approves PIP
Due Diligence Update
Board Approves FIP
Labour Standards, Environmental, Social or Ethical Considerations
VCML does not take into account labour standards, environmental, social or ethical considerations in selecting, retaining or
realising investments for the Fund, except to the extent that such issues have an effect on the price or value of investments.
28
4.3 Project Review Process
The Board of VCML has established an Investment
Committee, which formally meets at least quarterly to review
the progress of the Fund’s Projects and consider disposals
and/or alternate exit strategies if appropriate.
In addition, the Investment Committee continuously reviews
each Project at monthly Project Control Group meetings
comprising members of the Investment Committee and
senior management of VCML.
The Investment Committee refers all material matters to
the Board of VCML, including:
> any project where the Investment Committee expects that
material departures from the project’s original development
strategy will be necessary
> any project whose financial performance is expected by
the Investment Committee to be materially different from
that budgeted.
All disposals of assets require approval from the Board
of VCML.
Figure 4.2 Valad Ongoing Project Review Process
Project Implementation Plan
– Monthly Project Control Group
– Monthly Sales and Leasing
– Monthly Feasibility and Accounting Review
Fund Manager Meeting
Planning and Design
Building Works
Marketing Strategy
Project Disposal
Development Activity
> Appoint consultants
> Tendering contractor works
> Agent appointment
> Finalise design and plans
> Ongoing project management
> Set marketing plan
> Preparation of disposal plan
for Board approval
> Identify value engineering
opportunities
> Variation management
> Tenancy negotiations
> Document sale terms
> Practical completion of works
> Purchaser negotiations
> Complete disposal
> Organise planning approvals
> Finalise sales and leasing
29
4.4 Board of Directors of the Responsible Entity
Stephen Day
Executive Chairman
Peter Hurley
Executive Director
Stephen was an Executive Director of
Valad since founding the organisation
in 1995 until assuming the role of
Executive Chairman in July 2004. From
1985 to 1995 Stephen was employed by
Lend Lease where he was responsible
for the acquisition, development and
management of commercial, industrial
and residential projects in various
Australian capital cities. During this
time he was also based in Europe in
order to establish a research based
acquisition strategy for Lend Lease’s
global funds management business.
This business had property investments
in the UK, France and Spain.
Stephen has a degree in economics
and accountancy from Macquarie
University. He is responsible for the
sourcing and acquisition of property
related assets and investments,
and the initiation and negotiation of
new business opportunities consistent
with Valad’s expansion strategies.
Peter is currently an Executive Director
of Valad and has been a director of
Valad since 1997. He held the position of
Joint Managing Director until 2004, and
Managing Director until 2006. Between
1988 and 1997 Peter was employed
by Lend Lease where he acted as the
investment manager to a number of
Lend Lease property investment funds.
Immediately prior to joining Valad,
Peter was based in Singapore as the
investment adviser to Lend Lease’s Asia
Pacific Investment Company. Peter also
spent three years in Paris and London
where he was the Investment Manager
responsible for the acquisition and
management of Lend Lease’s European
retail portfolio. Peter has an honours
degree in civil engineering from the
University of New South Wales.
30
Trevor Gerber
Independent Non-executive
Deputy Chairman
Trevor was with Westfield Holdings
Limited for 14 years until 1999, as
Group Treasurer and subsequently
as Director of Funds Management
responsible for Westfield Trust and
Westfield America Trust. Trevor is
also a director of Macquarie Airports
Group and Macquarie ProLogis Trust,
and Chairman of Everest Babcock &
Brown Alternative Investments. Trevor
has a degree in accountancy from the
University of Witwatersrand, South
Africa, and is a Chartered Accountant.
Bob Seidler
Independent Non-executive Director
Robert Seidler is a partner of Blake
Dawson Waldron lawyers which he
joined after the Seidler Law Firm
merged with Blake Dawson Waldron in
2004. Prior to establishing the Seidler
Law Firm he was managing partner of
Coudert Brothers in both Sydney and
Tokyo. He is currently a member of the
Investment Review Board of Australian
Prime Property Fund, a member of the
Australian Government’s Corporations
and Markets Advisory Committee, an
alternate director of Leighton Holdings
Limited and Chairman of Hunter
Phillip Japan Limited. His previous
directorships include Mitsubishi Bank of
Australia Limited and Nikko Securities
Australia Limited. Robert has a law
degree from Sydney University.
Andrew Martin
Independent Non-executive Director
Andrew Martin joined Valad following
a 30-year property career including
stints in the UK and Indonesian property
markets and extensive work with a
number of Japan’s major real estate
investors, banks, institutions and
developers. Andrew spent 23 years
with Jones Lang LaSalle, including in
the role of Managing Director of Jones
Lang LaSalle Advisory. Prior to retiring
from Jones Lang LaSalle, Andrew was
an International Director in their Capital
Markets Group which was responsible
for the disposal and acquisition of real
estate across the commercial, retail
and industrial sectors, acting on behalf
of both domestic and international
investors. Andrew has a Bachelor of
Arts from the University of New South
Wales, and is a Fellow of the Royal
Institution of Chartered Surveyors
and a Fellow of the Australian
Property Institute.
31
4.5 Investment Committee of the
Responsible Entity
The members of the Investment Committee of the
Responsible Entity are as follows:
Stephen Day
Executive Chairman
For details of experience see previous page.
Peter Hurley
Executive Director
For details of experience see previous page.
Wendy Boxall
Fund Manager
Wendy Boxall is a Chartered Accountant with over 10 years
of experience in accounting and finance. Wendy’s experience
began with Deloitte Touche Tohmatsu in Auckland following
which she spent several years in London with Close Brothers
Corporate Finance, a leading independent UK investment
bank. On returning from the UK, Wendy spent three years
with Patersons Securities where she worked on a number
of capital raising transactions with a particular focus on
the property sector. Wendy has a Bachelor of Commerce
(Honours) and a Master of Commerce (with Distinction) from
the University of Auckland.
4.6 Senior Staff of the Responsible Entity
VCML’s senior staff have extensive experience in property
management, leasing and development, and finance. The
following senior staff of VCML will assist in the management
of the Fund on a day-to-day basis.
Paul Notaras
CEO Funds Management and Capital Services
Paul brings over 19 years’ experience as a senior executive
in property investment, finance and funds management.
At Valad, Paul is responsible for the group’s Funds
Management and third party joint venture business.
Prior to joining Valad, Paul was a Director and Principal
of ICA Property Group (acquired by Valad in July 2004) where
he was responsible for the establishment and growth of
the ICA Property Development Funds platform. Paul was
also a key executive in the establishment of GE Capital Real
Estate (a subsidiary of the General Electric Company of the
USA) in Australia in early 1997, becoming the Managing
Director for Australia, a position he held until joining ICA
Property Group. Paul has a degree in economics and
accountancy from Macquarie University.
Nicki Garrett
Head of Equity Markets
Nicki has extensive domestic and global investment banking
and equity capital markets experience having worked in
the industry for over 10 years. In particular, Nicki has a
significant track record of successful capital raisings and
mergers and acquisitions transactions in Sydney, London
and Asia. At Valad, Nicki is responsible for the group’s
product development and distribution. Prior to joining Valad,
Nicki had positions with Macquarie Bank, ABN AMRO and
Patersons Securities Limited. Nicki completed a Bachelor
of Laws (Honours) and a Bachelor of Commerce (with
Distinction) at the University of Auckland in New Zealand.
Wendy Boxall
Fund Manager
For details of experience see Section 4.5.
32
Chris Carroll
General Counsel / Compliance Manager
Martyn McCarthy
CEO Real Estate Investments
Chris has held senior legal and management positions
at Lend Lease in Australia and Asia and more recently at
Principal Global Investors, where he was largely responsible
for the acquisition of the management rights to the Lend
Lease US Office Trust and the sale of Principal’s hotel
portfolio. Chris has extensive experience in large property
transactions, mergers and acquisitions as well as general
management.
Martyn is responsible for Valad’s acquisition, management
and divestment team for Commercial Real Estate
Investments. Since joining Valad in 2003, Martyn has
sourced, acquired and disposed of in excess of $2 billion
worth of commercial, industrial and retail investments
including the acquisition of Millers Self Storage properties
worth over $250 million, as well as the seed assets for the
Fund. Prior to Valad, Martyn was employed for six years
at GE Real Estate, where he was responsible for sourcing
acquisitions, establishing joint ventures and arranging
structured finance for commercial, industrial, retail and
residential property, with particular focus on value-adding
opportunities. In this role, he was involved in transactions
in Australia and New Zealand with a value exceeding
$1.5 billion. Prior to joining GE, he worked in commercial
real estate agency and valuation practices.
Jeremy Stevenson
Legal Counsel, Funds Management and Capital Services
Jeremy is legal counsel for the funds management and
capital markets division at Valad Property Group. He has over
10 years of experience in corporate and commercial legal
practice, with a particular focus on investment management
law and the establishment of domestic and international
investment funds. Jeremy has worked in Adelaide, London
(where he spent over five years at Clifford Chance LLP, one
of the world’s premier law firms) and Sydney. Jeremy has a
Bachelor of Commerce and a Bachelor of Laws (Honours)
from the University of Adelaide. He has completed postgraduate studies in legal practice and finance.
Shaun Hannah
CEO Real Estate Developments
Shaun has 20 years of experience in the property industry
with considerable expertise in industrial, office and
bulky/service retail development. Shaun was a Director
and Principal of ICA Property Group from 1992 where he
was responsible for sourcing and executing the group’s
development projects. With Valad’s acquisition of ICA
Property Group in 2004, Shaun is now responsible for the
same role within Valad. Shaun is a member of various
professional institutions, including being a Fellow of the
Australian Property Institute and a Founding Member of
the Property Council of Australia Industrial Committee.
Todd Solomon
Development Executive
Todd has responsibility for sourcing and managing Valad
investments in Victorian developments. Todd commenced
his career in 1994 at the US investment bank Salomon
Brothers, based in New York. He transferred to Melbourne
with that firm in 1996 where his focus was on equity and
debt finance in the resources sector. In 2000, Todd joined
Macquarie Bank’s property investment banking group
and in mid 2005 he relocated to Sydney with Valad as Fund
Manager of VOF. He was actively involved in the purchase and
investment management of the assets in the Fund. Todd will
maintain an active role with the Fund through to completion
of the Offer. His role will then shift to sourcing new assets
which may suit Valad fund management platforms. Todd
holds a Bachelors Degree (Honours) in Business Economics
from the University of California at Los Angeles.
33
> 5 ASSET
PORTFOLIO
5.1 Overview of the Asset Portfolio
5.1.2 Minchinbury Hometown, Western Sydney, NSW
The Fund will comprise five Projects in total, four of which
are already owned by the Fund. The fifth Project, Noosa
North Shore, will be introduced as part of the recapitalisation
of the Fund. The Projects comprise:
> An established retail homemaker centre in Sydney’s West
near the M4/M7 motorway interchange with good exposure
to the Great Western Highway
5.1.1 Melbourne International Airfreight Centre,
Tullamarine, VIC
> 28 tenancies in total, contained within nine separate
buildings located around the perimeter of the site in an open
centre format.
> A prominent industrial estate located two kilometres
from Melbourne Airport with over 370 metres of frontage
to the Tullamarine Freeway
> Net lettable area of 24,137 square metres with 35 office/
warehouse units and parking for 450 cars
> MIAC offers excellent access from the Tullamarine
Freeway with attractive immediate services including
restaurants and a shopping centre.
Project Value-adding Strategy
> Purchased in August 2005 for refurbishment, lease-up
and sale
> 19,345 square metres net lettable area and 435 car
spaces on approximately 5.3 hectares of land
> The Fund purchased the property in June 2006 to
undertake a cosmetic refurbishment, strata subdivision and
on-sale of strata retail units to current tenants and investors
> A strata plan has been approved by Council and will
shortly be lodged with the NSW Department of Lands
> Minchinbury Hometown is to be rebranded as “M Centre”
as part of a rebranding and repositioning marketing
campaign designed to reinvigorate interest in the centre
and attract new tenants to the site.
> Building works are now substantially complete
> Leasing agents appointed to market remaining vacancies.
Key attractions for new tenants include location, affordability
compared with nearby offerings and flexibility with office/
warehouse size
> Sale of the asset will be undertaken once occupancy
exceeds 75%.
5.1.3 Oran Park, South-west Sydney, NSW
> Country estate comprising 107 hectares of land
approximately eight kilometres from Campbelltown
in south-west Sydney
> The land is currently zoned rural, but lies within the
Sydney Metropolitan Strategy, South-west Growth Centre
and has been earmarked by the NSW State Government
for future urban growth.
> Valad is currently working with state and local planning
authorities to accelerate the rezoning of the land to position
it as a future residential land subdivision and to increase the
subdivisible productivity of the land by minimising current
heritage overlay restrictions
> Upon advancing progress towards both these objectives
and achieving an uplift in land value, the Fund will seek to
sell its interest in the land.
35
> 5 ASSET PORTFOLIO
5.1.4 Richlands, Brisbane, QLD
5.1.5 Noosa North Shore, Noosa, QLD
> Two vacant adjoining land parcels with a total area
of 6.7 hectares in an established industrial precinct
20 kilometres south west of Brisbane
> Interest in a 90 beach house holiday home development
located in the exclusive and picturesque Noosa North Shore
> The land is in close proximity to the Ipswich and
Centenary Motorway interchange which is currently
under construction.
> Amalgamation of the two land parcels into a single site,
thereby significantly improving access to the second parcel
> Improve zoning to “General Industry” and “Light Industry”,
drawing upon proven project delivery, town planning
execution and marketing expertise possessed by Valad
> Upon achieving a satisfactory planning outcome, the Fund
will sell the land to either an industrial user or to a property
developer with planning consent.
> Development is being undertaken by Petrac, an
established Queensland-based residential property
developer, and overseen by VDML
> Masterplan approval has been obtained for the project,
and development consent has been obtained for the first
stage which is presently under construction
> Subject to the successful completion of this Offer, the
Fund will purchase a variable preferred equity interest of
up to $10.1 million from VCML.
> Complete zoning and infrastructure works
> Market the sale of the land and construct premium
accommodation, targeting purchasers who are
environmentally conscious and wish to holiday in a natural
setting, but do not want to be without modern day luxuries
> Stage 1 sales are already virtually complete with an
average sale price achieved of $1.2 million per home.
Figure 5.1 Summary of Portfolio Assets
PROJECT NAME
TYPE OF PROJECT
MIAC, Tullamarine
Property repositioning and lease-up
Minchinbury Hometown
Property repositioning and strata sell-down
INDEPENDENT
VALUATION
FUND
EQUITY INVESTMENT
ANTICIPATED
REALISATION DATE
$24.2m
$6.46m
September 2007
$17.5m
$3.675m
February 2010
8
Oran Park
Residential rezoning
$24.0m
$10.1m
July 2008
Richlands
Industrial rezoning
$11.4m
$3.9m
June 2008
Noosa North Shore9
Residential development
$11.6m
Up to $10.1m
November 2009
8
9
This equity investment will not be required in full until settlement of the acquisition of Oran Park which will take place in December 2007.
Based on the Expected Capital Raise the investment in Noosa North Shore will be $8.8 million. The independent valuation is based upon the mid-point
of the valuation range.
36
Figure 5.2 Location by Value of Equity Investment
Figure 5.3 Location by Gross Value
> Victoria 19%
> Victoria 28%
> Queensland 38%
> Queensland 24%
> New South Wales 43%
> New South Wales 48%
Figure 5.4 Equity Investment by Sector
Figure 5.5 Gross Value by Sector
> Industrial 12%
> Industrial 13%
> Commercial 19%
> Commercial 28%
> Residential
development 10%
> Retail 11%
> Residential
development 26%
> Residential
rezoning 28%
> Residential
rezoning 32%
Figure 5.6 Type of Risk Exposure by Equity Investment
Figure 5.7 Type of Risk Exposure by Gross Value
> Income generating 30%
> Development
preferred equity 27%
> Retail 21%
> Development
preferred equity 10%
> Income
generating 49%
> Land rezoning 41%
> Land rezoning 43%
Note: It is assumed the gross value and equity value for the Noosa North Shore investment are the same, being $8.8 million based
on the expected capital raise.
Figure 5.8 Expected Project Realisation Timetable
PROJECT
2007
JUL
2008
OCT
JAN
APR
2009
JUL
OCT
JAN
APR
2010
JUL
OCT
JAN
MIAC
Minchinbury
Oran Park
Richlands
Noosa North Shore
37
> 5 ASSET PORTFOLIO
5.2 Project Detail
5.2.1 Melbourne International Airfreight Centre,
Tullamarine, VIC
Project Overview
MIAC was acquired by the Fund in August 2005 with the
primary strategy being to stabilise an underperforming
asset through refurbishment and restructuring of its leases.
During 2006 major refurbishment works were completed
and the estate now benefits from an updated internal
and external presentation, enhanced accessibility
(with a new vehicular exit), a B-double truck turning
facility, low-maintenance native landscaping, entry
signage and a garden café. MIAC will be marketed for
sale in the 2008 financial year.
Building Description
The property comprises a mix of office/warehouse units
originally constructed in the 1980s. In aggregate, the
property comprises a total of 35 units, with the average office
area being 183 square metres and the average warehouse
774 square metres. The net lettable area of the buildings is
24,137 square metres.
MIAC offers potential tenants:
> close proximity to Melbourne Airport with significant
frontage to the Tullamarine Freeway
> close proximity to the entry/exit to the
Tullamarine Freeway
> nearby amenities including Gladstone Park Shopping
Centre, fast food restaurants
> an affordable alternative to new industrial space
Property Location
The property is approximately two kilometres from
Melbourne Airport with more than 370 metres of frontage
to the Tullamarine Freeway and 94 metres of frontage to
Mickleham Road. The surrounding area is predominantly
industrial warehouses, appealing to airport related uses
(freight forwarding and logistics) with the Age Print Centre
immediately to the north of the property. Proximity to the
Tullamarine Freeway, Western Ring Road and City Link
provides excellent linkages to the airport, CBD, ports,
suburbs and all major interstate transport routes.
The location has historically been attractive to freight
forwarders and airport related businesses, and this property
offers a cost effective solution for tenants compared to
design and construct options nearby.
38
> flexible warehousing with ability for incremental
take-up over time
> a competitive rental price point.
Project Strategy
MIAC offers a repositioning opportunity via refurbishment,
leasing and on-sale. With the property now 73% occupied
and works completed, the main focus is centred on leasing
ahead of marketing the property for sale.
BROADMEADOWS
W
Tullamarin
es
te
rn
Ri
ng
Rd
Northern Ring Rd
MIAC
COBURG
e Fwy
Eastern Hwy
MELBOURNE CBD
Princes Hwy
HAWTHORN
PORT MELBOURNE
Project Funding
The table below shows the total funding requirement
for the Project:
Senior Debt Limit
$16.94 million
Mezzanine Debt Limit
$0.8 million
Equity – VOF (100%)
$6.46 million
Total Value to Fund
$24.2 million
Debt Funding
Senior debt has been provided to the Project on the
following terms:
Facility Limit
$16.94 million
Expiry
30 June 2008
Loan to Value Ratio
70%
Repayment Terms:
Bullet on sale
In addition Valad provides $0.8 million of mezzanine debt
to the Project. The mezzanine debt is subordinated to
the senior debt facility and ranks in priority to the Fund’s
equity investment. The outstanding balance of the facility
(including any accrued interest) will be repaid upon the
sale of MIAC.
Melbourne International Airport
Key Property Information
PROJECT DESCRIPTION
Location
International Drive,
Tullamarine, VIC
Description of
Proposed Project
Refurbishment, leasing
and sale
Land Area
5.3ha
Industrial estate offering mix
of office/warehouse units
Car Spaces
Approximately 450
Major Tenants
Smith Lewis,
United Air Cargo
PROJECT VALUATION
Valuation
$24.2 million
Valuer
m3property
Date of Valuation
31 December 2006
39
> 5 ASSET PORTFOLIO
5.2.2 Minchinbury Hometown, Western Sydney, NSW
Project Overview
The Fund purchased Minchinbury Hometown, a first
generation bulky goods/homemaker centre, in June 2006.
The intention of the purchase is to conduct a cosmetic
refurbishment, strata subdivision and sale of the retail
premises to investors and owner-occupiers.
Property Location
The property occupies a prominent corner position on the
Great Western Highway, immediately to the north of the
M4 Motorway and approximately 41 kilometres by road to the
west of the Sydney CBD. The property has good access from
the Great Western Highway and Sterling Road, with separate
service areas providing vehicular entry and exit points.
Bulky goods retail use is well established in the locality
of Minchinbury and is interspersed along the arterial
thoroughfare.
The building is a single level retail centre in an “open level”
format totalling 19,345 square metres of gross lettable area
and centralised parking for 435 cars. The centre comprises
28 tenancy areas of varying sizes, but broadly divisible
as follows:
2
2
> 20 tenancy areas of between 68m and 701m
> 8 larger tenancy areas of between 833m2 and 2,417m2.
Most tenancies are occupied by retail tenants, with
connected office space available above one of the tenancies.
Project Strategy
The property trades as “Minchinbury Hometown” and is
currently an underperforming retail centre with 28 individual
tenancies/units. The intention is to convert the existing
buildings on site from leased retail tenancies to separately
owned strata units. The cost of this activity will be minimal
as the buildings are already suited for this use.
40
The refurbishment works to the centre support an exciting
rebranding and repositioning as “M Centre: Lifestyle, Home,
Outdoor” and will be marketed as a unique opportunity
to purchase retail units in an established precinct.
The proposed works are to include new estate signage,
painting throughout the complex, improved landscaping,
and a commitment to the ongoing promotion of the centre
throughout the sell-down period. These works have been
tested with the existing tenants within the property, and
have been well received.
The marketing campaign will be broad reaching, offering
major retailers an opportunity to position themselves in
the Minchinbury area, and at the same time continuing
to provide local businesses a home within an established
centre in the area.
The Minchinbury market is regarded as a strong precinct
for small strata unit sales. M Centre will service this
ongoing demand, but also appeal to a user group that
seeks to incorporate an opportunity to sell their products
in a prominent centre at a comparable price to standard
industrial units in the area with lesser exposure. Likely
user groups include, but are not limited to, homewares,
trade-related businesses and furniture groups.
Development Approval
The land is currently zoned 4(c) “Special Industrial”, which
permits a broad range of light industrial and retail uses.
A technical due diligence review has been undertaken which
indicates that development consent has been obtained
for the strata subdivision of the property. The strata plan
was prepared and endorsed by Council, however has not
been lodged with the NSW Department of Lands. As the
development consent has not been superseded, it remains
current and (upon lodgement with the NSW Department of
Lands) can still proceed at nil upgrade works cost to VOF,
thereby facilitating the exit strategy at negligible cost.
e St
le Ave
Ro
Great
Georg
Hwy
Weste
pe
rR
d
lis
le
A
y
ve
MINCHINBURY
HOMETOWN
Rop
Archb
r
Ca
rn Hw
old St
estern
Carlis
Great W
er
Rd
BLACKTOWN
PENRITH
M4 Motorway
Project Funding
for the Project:
Senior Debt Drawdown
$13.825 million
$3.675 million
Value
$17.5 million
Debt Funding
following terms:
Facility Limit
$19.4 million
Loan to End Value Ratio
65% on “as if” complete value
of $30.5 million
Term
Expiry 22 June 2009
Repayment Terms
Bullet on sales
PROJECT DESCRIPTION
Location
Corner Great Western
Highway & Colyton Road,
Minchinbury, NSW
Description of
Proposed Project
Bulky retail refurbishment
and strata subdivision
Land Area
5.315 hectares
Single level bulky goods
retail centre
Car Spaces
435
Major Tenants
Blue Haven Pools
PROJECT VALUATION
Valuation
$17.5 million
Valuer
Knight Frank
Date of Valuation
31 March 2007
41
> 5 ASSET PORTFOLIO
5.2.3 Oran Park, South-west Sydney, NSW
Project Overview
Oran Park is a “greenfield” englobo site of approximately
107 hectares which is intended for future residential land
subdivision. A call option to acquire the property was entered
into by the Fund in July 2006 with deferred settlement due
to take place in December 2007. Oran Park was identified
by the Fund as an attractive land repositioning/rezoning
opportunity with Valad expertise being used to “add value”
to the subject land by obtaining planning consent for higher
and better use (residential).
Property Location
The property is situated in Catherine Fields with frontage to
Cobbitty Road and Camden Valley Way. Catherine Fields is a
predominantly rural/residential suburb that lies some eight
kilometres north-west of Campbelltown and 50 kilometres
by road south-west of the Sydney CBD.
Sydney’s south-west represents an affordable alternative
to the inner suburbs, with the median house price in the area
more than 25% below the Sydney average. The completion
of the M5/M7, Eastern Distributor and M4 have benefited the
region with shorter commuting times to the Sydney CBD and
airport, and better infrastructure, attracting commercial
and industrial operations. PRD Realty highlights Sydney’s
south-west as one of Sydney’s few growth corridors, the
other being the north-west (Rouse Hill).
Project Strategy
The strategy for this acquisition is to add value by:
> substantially advancing a rezoning to residential usage
by positioning this parcel of land in the first stage south-west
growth centre release (Oran Park) or within the first stage
release of the Catherine Fields precinct
> work with neighbouring land owners to achieve a master
plan and infrastructure contribution strategy
> pursuing the sale of the land on an englobo basis in a
two-year time frame. This time frame will be constantly
reviewed with the aim of ensuring that the return to the
Fund is maximised.
42
The transaction will draw upon significant project delivery,
town planning and repositioning expertise possessed
by Valad.
In Sydney’s south-west there is a supply shortage of
large-scale landholdings in the hands of institutional
developers. Large parcels of land are controlled by private
individuals, with few controlled by institutions especially
to the north of the subject site. There is a high degree of
fragmented ownership. Valad believes that there is strong
competition among major land developers to secure
contiguous sites for subdivision. Therefore, Oran Park
represents a rare opportunity in the south-west which can
be expected to attract significant attention when VOF seeks
to sell-down an interest in the project.
The land is currently zoned “1(a) Rural”, and forms part
of the “South-West Growth Centre Draft Structure Plan”
under the Department of Planning’s “Sydney Metropolitan
Strategy”. The Draft Structure Plan is an indicative regional
land use plan that guides detailed planning for land use
precincts once released. The land sits within the “Catherine
Fields precinct” and is immediately adjacent to the initial
release areas of Oran Park and Turner Road.
Prior to Valad’s purchase of the site, Oran Park was not
being actively positioned as a future residential estate.
Valad has made a submission to the Department of
Planning to accelerate the rezoning of the land within the
first stage of residential land release in the South-West
Growth Corridor. Valad is also working with neighbouring
landowners to advance resolution of heritage, infrastructure
delivery and zoning issues.
Northern Growth Centre
M7
M2
PARRAMATTA
M4
M7
SYDNEY
CBD
LIVERPOOL
M5
South West Growth Centre
PORT BOTANY
ORAN PARK
CAMPBELLTOWN
Project Funding
To date, all expenses and costs have been funded out of
the Fund’s equity. Oran Park was purchased on a deferred
settlement basis and is due for settlement in December
2007. The settlement will be funded by a combination of
cash held by the Fund and debt finance, which is intended
to be secured prior to settlement.
The table below shows the total funding requirement for the
Project:
$13.3 million
$10.1 million
Total Cost to Fund
$24.0 million
1//354258
190Ha
1//354258
34Ha
27//213330
34Ha
27//213330
59Ha
Debt Funding
An indicative term sheet for the debt funding has been
received and is illustrated below:
Facility Limit
$18.2 million
Expiry
12 months from settlement
Loan to Value Ratio
80% of as is value at
settlement
Repayment Terms
Bullet on sale
PROJECT DESCRIPTION
Location
931 Cobbitty Road,
Catherine Fields, NSW
Description of
Proposed Project
Residential rezoning
Land Area
107 hectares
PROJECT VALUATION
Valuation
$24.0 million
Valuer
Colliers
Date of Valuation
31 March 2007
43
> 5 ASSET PORTFOLIO
5.2.4 Richlands, Brisbane, Queensland
Project Overview
The Fund purchased two vacant parcels of land comprising
a contiguous 6.7 hectare future industrial zoned site in
November 2006. The opportunity exists to add value to the
subject land by consolidating the two properties, obtaining
planning consent for industrial uses, drawing upon the
proven project delivery, town planning execution and
marketing expertise possessed by Valad.
Property Location
The property is situated within the established industrial
area of Richlands, approximately 20 kilometres south-west
of the Brisbane CBD. Richlands, which is located in close
proximity to the industrial areas of Wacol and Darra, has
become popular with transport and logistics companies.
Surrounding users in close proximity to the site include
Woolworths, Coca-Cola, TNT, Toll Logistics, Electrolux
and Scania.
This locality is characterised by low supply (of both land and
investment stock) and underpinned by increasing tenancy
demand driven by infrastructure improvement (including the
Logan/Ipswich/Centenary Motorway Corridor). The majority
of these upgrades will improve traffic connections to the
site. Specifically, it has been reported that the Australian
Government has provided $320 million to upgrade the
Ipswich Motorway from Wacol to Darra. When complete,
this will greatly improve safety, reliability and traffic flows
to Richlands and surrounding areas.
It is also expected that following the mooted redevelopment
of the nearby Wacol Sanananda Barracks site into a large
mixed use commercial, retail and industrial development,
the profile of the locality will improve greatly by opening
up future growth and job opportunities in the surrounding
areas. This development is at the very early planning stages
and is expected to take several years to complete.
Property Description
The property comprises two contiguous land parcels
totalling 6.7 hectares. The Orchard Road site is currently
zoned “General Industry” and the Archerfield Road site is
currently zoned “Future Industry”.
44
Project Strategy
Since purchase, the Fund has worked with local planning
authorities to advance the proposed industrial usage for
the site.
The opportunity exists to add value to the land by
consolidating the two properties, significantly improving
access to the second parcel, and obtaining planning consent
for industrial uses. The exit strategy will involve securing
sale to appropriate users (industrial) and/or on-sale to
developers with the planning consent intact. Pre-leases
to appropriate users may be considered in order to enhance
site value.
BIS Shrapnel report that warehousing is the dominant
driver for industrial property in the south-east Queensland
industrial market and that this trend is set to continue over
the next decade. In recent times demand for warehousing in
south-east Queensland has been sustained by the resources
boom, strong retail activity and higher construction
spending, and BIS Shrapnel expects this momentum to be
maintained through to at least 2008.
Specific elements of the property that will attract future
acquirers include:
> frontage to each of Orchard Road and Archerfield Road
offering good exposure
> the location is approximately three kilometres south-east
of the Ipswich Motorway/Centenary Motorway interchange
which is currently under construction
> the locality is underpinned by low industrial land supply
and increasing tenant demand
> plans for the nearby 107 hectare Wacol Sanananda
Barracks site include mooted development plans for a mix
of industrial, commercial, residential and large-format retail
projects which will further benefit the precinct.
A preliminary approval for material change of use to
“General Industry” and a reconfiguration of lot for a seven
lot industrial subdivision has been granted for 301 Orchard
Road. There is currently no development approval for the
Archerfield Road site.
The Fund is working to secure a “Light Industry” zoning
for the Archerfield Road site and planning consent for
the development of industrial buildings on both sites.
The proposed application is consistent with the Brisbane
City Council strategic planning objectives.
P ac
ific
Hw
Ce
nt
en
ar
yH
wy
y
BRISBANE CBD
Ipswich Mwy
RICHLANDS
ci
Hw
wy
fic
Logan M
Pa
IPSWICH
y
BEENLEIGH
Project Funding
for the Project:
$7.5 million
$3.9 million
Total Cost to Fund
$11.4 million
Debt Funding
following terms:
Facility Limit
$7.5 million
Loan to Value Ratio
Maximum 60% loan to
total cost
Term
Expires December 2008
Repayment on Sales
100% of the debt will be
repaid from sales proceeds
PROJECT DESCRIPTION
Location
301 Orchard Road &
255 Archerfield Road,
Richlands, QLD
Description of
Proposed Project
Rezoning to General and
Light Industrial
Land Area
6.7 hectares
PROJECT VALUATION
Valuation
$11.4 million
Valuer
Knight Frank
Date of Valuation
31 March 2007
45
> 5 ASSET PORTFOLIO
5.2.5 Noosa North Shore, Noosa, Queensland
Project Overview
VFML and a third party property developer, Petrac, have
entered into a joint venture over two separate projects in
Noosa. The two sites are located within one kilometre of
the beach on one side and lake on the other, separated from
Noosa by the Noosa River. These projects represent the only
development opportunities available in the area.
The interest in Noosa North Shore, which is to the south,
is the subject of this Offer. The project comprises the
development of 90 luxury holiday homes within the existing
bushland setting. Masterplan approval has already been
obtained for the Project, and development consent has been
obtained for the first two stages. Stage 1 is presently under
construction.
Property Location
Noosa North Shore is part of a unique and picturesque
wilderness area on Queensland’s Sunshine Coast. With
Laguna Bay and the beach to the east and Lakes Cooroibah
and Cootharaba to the west, the site has numerous natural
features including native animal and bush life and adjoins a
national park. Noosa North Shore is accessed via ferry and
has undergone little development, with future development
of the area restricted and tightly controlled. Whilst Noosa
North Shore is situated in a pristine natural setting and
physically separated from the rest of the Noosa area, it is
only a 15 minute drive (including a five minute ferry trip) to
Hastings Street, Noosa.
Noosa North Shore
Noosa is a tightly held land market with few land subdivision
opportunities available within Noosa Shire. The property
comprises 71.2 hectares, with the development being
contained within a site of approximately 20 hectares and the
remainder to be kept in its natural form. Valad’s joint venture
partner, Petrac, has controlled the site for over three years,
during which time it has masterplanned the development.
46
The Project comprises the development of 90 modern beach
houses within the natural environment. The product is
designed to cater for purchasers who are environmentally
conscious and wish to holiday in a natural setting but do not
want to be without modern day luxuries. The beach houses
are to be contemporary in style, using lightweight natural
building materials designed to blend in with the natural
setting. The houses will be built over four stages, with
Stage 1 to incorporate common facilities including a
recreation centre and associated open space.
The houses are designated “short stay” with a maximum
stay of 12 weeks per year, and therefore will be sold as
holiday homes under a community title. An on-site manager
will be available to manage a letting pool for any owners
who wish to lease their home when it is not being used and
to provide a concierge type service including maintaining
the bush environment surrounding the homes.
The current status of the project is:
> Stage 1 building works approximately 40% complete
> Stage 1 roads 100% complete
> Stage 2 development application approval expected
in May 2007
> Stage 3 concept design commenced.
The current status of sales is:
Stage 1:
> 20 unconditional (average price achieved $1.2 million)
> 1 manager’s residence (Lot 2)
> 3 available (Lots 5, 8 & 22).
Stage 2:
> 8 unconditional (Lots 26, 27, 28, 35, 37, 39, 41 & 48)
> 16 available.
The layout of the project is illustrated on page 48.
Beach Road
Holiday Homes
Noosa Ferry
NORTH
SHORE
Eu
mu
ndi
No
osa
Rd
Bec
kma
ns R
d
NOOSA
HEADS
Fennie Cree
k Rd
NOOSAVILLE
David L
ow Wa
y
Moorin
dil Rd
Maximil
lian Rd
Beach Rd
PROJECT DESCRIPTION
Location
Noosa North Shore, – Corner
Maximilliam Road and Beach
Road, Noosa, QLD
Description of
Proposed Project
Residential land development
Land Area
71.2 hectares
PREFERRED EQUITY VALUATION
Valuation
$11.6 million being the
mid-point of the valuation
range determined of
$11.3 million to $11.9 million
Acquisition Price to Fund
Up to $10.1 million
Valuer
BDO Corporate Finance
Date of Valuation
31 March 2007
47
> 5 ASSET PORTFOLIO
The Partner – Petrac
Petrac is a south-east Queensland based private development
company which was established in 1993. Projects undertaken
by Petrac have involved residential land subdivisions including
land only and house and land community style developments.
In addition, Petrac developed, and currently manages, an
existing assisted living retirement village at Banora Point
NSW, and has owned and managed the Noosa North
Shore site since 2003. Petrac is currently developing one of
Australia’s largest active adult retirement communities
at Redland Bay, comprising 450 dwellings. The company
is soon to undertake another major retirement community
development in the bayside suburb of Wynnum. It also
recently acquired an 80 hectare waterside development site
in Lennox Head in northern New South Wales. The current
Petrac pipeline has a value exceeding $1.2 billion.
VOF Interest
VOF will enter into an investment agreement with VCML
under which VOF will have a right (not an obligation) to
acquire up to $10.1 million of VCML’s interest in the Project.
Funding Structure
VCML has a preferred equity investment position in the Project.
Part or all of the preferred equity investment will now be
assigned to VOF upon exercise of the call option by VCML.
The funding for this Project is provided from a number of
sources, summarised as follows:
(1) Senior debt, which is secured by first mortgage security
over the land and project. This is provided by NAB on an
arm’s length basis
(2) Preferred equity (i.e. secured subordinated debt), which
is secured by second mortgage security over the land and
project. 70% of the Project equity is provided by VCML
on a preferred basis. The balance of equity is provided
by Petrac.
The key terms of the investment by VOF in the Project are
as follows:
> VCML and VOF will provide up to $10.1 million of preferred
equity, however, based on the expected level of redemptions
under the Withdrawal Offer, this is expected to be $8.8 million
48
> The return on VOF’s preferred equity comprises a coupon
of 11.5% p.a. payable as detailed below. In addition VOF
will receive a proportion of the Project profit based on the
proportion of VCML’s interest it acquires. VCML is entitled to
receive 40% of the Project profit until it receives all profit and
interest owing to it (equal to an IRR of 25%) and thereafter a
25% share of project profit.
Proceeds from sale of the Project will be applied in the
following priorities:
> Firstly, to fund any costs of the Project
> Secondly, to pay amounts due and payable to the senior
lender
> Thirdly, to repay VCML and VOF’s preferred equity finance
and associated coupon, which will be in priority to Petrac and
its investors’ share of their equity and coupon
> Fourth, to repay Petrac and its investors’ equity finance
and associated coupon
> Finally, to repay the profit share (if any) to each of VOF
and Petrac.
There are a number of mechanisms in place to ensure VOF
maintains close supervision of the project with “step in”
rights available should an event of default occur.
Noosa North Shore – South Site Plan
> 6 INVESTMENT
BENEFITS AND RISKS
> 6 INVESTMENT BENEFITS AND RISKS
6.1 Significant Potential Investment Benefits
of the Fund
Potential Exposure to Greater Returns
> The Fund provides an opportunity for investors to gain
exposure to the attractive returns available from property
development and repositioning
> These returns are generally higher than investors would
expect to receive from investing in more traditional property
trusts holding passive assets with limited development upside
> The target pre-tax IRR for the fund is at least 17%, after all
fees and expenses.10
Experienced Management Team
Distributions and Franking Credits
> It is intended that the Fund will pay distributions
following the realisation of capital and profits for each
project. These distributions will consist of both after tax
profits and capital returns
> Unitholders may be able to use any franking credits on
the component of distributions that consists of a distribution
of after tax income to reduce income tax otherwise payable.
Projects are Diversified Across Different Market Sectors
and Geographical Regions
> The Fund is diversified across Victoria, New South Wales
and Queensland with exposure to retail, commercial/
industrial and residential sectors
> The Fund will be managed by an experienced
management team with substantial property investment and
development, and funds management expertise
> Diversification mitigates the risk of being exposed to
a single sector or geographic region.
> The Board, the Investment Committee and the senior
managers of VCML all have extensive experience in project
management, project financing, development management
and property funds management across a broad range
of property investment vehicles and across all property
asset classes including office, retail, industrial and
residential sectors
Enhanced Returns through Debt Funding, with Recourse
Limited to Equity Capital Contributed to the Fund by Investors
> The weighted average internal rate of return achieved
by the previous investment vehicles managed by Valad
is 26.5% (after all fees and expenses) demonstrating the
success Valad vehicles have experienced through Valad’s
management. (Please note: past performance is in no way
an indication of the future performance of the Fund).
> The Fund has invested in property opportunities that are
debt funded at the Project level
> This has the benefit of enhancing the returns on investors’
equity capital without investors bearing the risks of direct
recourse to other assets commonly associated with personal
debt financing.
Figure 6.1 Summary of Asset Portfolio
Project:
Sector:
Location:
Risk Profile:
MIAC
Commercial
industrial
Melbourne,
Victoria
Repositioning of
existing property
MINCHINBURY
HOMETOWN
ORAN PARK
RICHLANDS
NOOSA
NORTH SHORE
Retail
Residential land
Industrial land
Residential
Western Sydney,
New South Wales
Repositioning of
existing property
South-west Sydney, Brisbane,
New South Wales
Queensland
Land rezoning
Land rezoning
10 This is not a forecast and should not be relied upon as such.
50
Sunshine Coast,
Queensland
Residential
development
Investment Term
6.2 Significant Potential Risks of the Fund
> The properties and assets of the Fund are to be sold
in accordance with the strategy that VCML believes will
maximise Unitholder returns. After sale, all retained
earnings and equity capital realised from a project net of
liabilities, fees and taxes will be distributed to Unitholders
in proportion to their Unitholdings
Before deciding whether to apply for Units, investors
should consider whether an investment in the Fund is
suitable for them, and recognise that there are a number
of risks associated with investing in property development
and repositioning opportunities.
> The Fund has a comparatively short life cycle. It is
expected that all projects will be completed and sold within
three years.
Exit Mechanism
> To the extent that there is a residual value of property
unsold three and a half years post allotment of Units to new
investors, Valad will make an offer to Unitholders to acquire
or redeem their Units as described in Section 2.10.
Certainty of Projects
> The Fund will convert to an unlisted property trust
comprising five Projects
> No other projects will be introduced to the Fund, providing
investors with certainty over the Asset Portfolio and term of
the Fund.
None of VCML, its Directors and the Underwriters
guarantees that the Target IRR will be achieved from all or
any Projects. Investors are advised to review the descriptions
of the Asset Portfolio in this PDS and the assumptions and
financial information in Section 8 to determine their own
view on the future performance of the Fund.
Investors should note that while the Responsible Entity
has undertaken due diligence on each of the Projects and
their feasibility studies to satisfy it that the assumptions on
which the target return is based are reasonable, including
consulting relevant experts, many risks are beyond the
control of the Responsible Entity and may not be able to
be mitigated. Investors should also note that property
repositioning and development activities are by their nature
riskier than investing in completed and tenanted properties.
Investors should appreciate that:
> the Target IRR may not be achieved
Alignment of Interests and Co-investment
Valad’s interests will be aligned with those of the Fund’s
investors via:
> Valad will hold a minimum investment of 6,257,000 Units
> Valad Directors will hold a minimum of a further
496,000 Units
> The Development Manager will be entitled to performance
fees from Projects if profits individually exceed the Target IRR.
> the amount, timing and tax nature of distributions may
be irregular
> there is no right for investors to redeem their Units should
an investor wish to exit the Fund until three and a half years
from Allotment
> there is a risk that investors may receive less than their
initial investment upon transfer of their Units, or upon the
Fund being wound up.
The risks described in this section include general risks
facing the Fund and specific risks relating to the properties.
The Fund has exposure to five Projects, and as such the
specific risks described in this section may impact each
of the Projects to varying degrees.
Prior to making a decision to invest in the Fund, investors
should carefully consider the risks detailed below and other
information contained in this PDS and seek advice from their
financial adviser.
51
Assumptions Not Achieved
The assumptions made in the feasibility analysis undertaken
on the properties in the Asset Portfolio may not eventuate
or be met, and as a consequence distributions of capital
and profit may be insufficient to meet the Target IRR.
Risks from Property Development
> The cost of construction or refurbishment may be greater,
and the time required to complete the Projects may be longer
than expected
> The cost of development may be adversely affected by
factors such as inclement weather, industrial action and
construction and contractual difficulties
The return to investors will depend on returns achieved
from the Projects. The return from these investments and
the value of the Asset Portfolio will be affected by numerous
factors. These factors include, but are not limited to the
following:
> Where Projects are developed or managed by a third party
unrelated to Valad, disputes may arise between the Fund and
the third party such as disputes over defaults and disputes
over strategy for the property. Noosa North Shore is the
only Project in the portfolio being developed by an unrelated
third party
> General economic and real estate market conditions
which may affect the value of the Projects. Project values
may not increase as forecast, or they may decrease
> Contractual counter-parties may default on their
obligations to the Fund, thereby leading to increased costs,
a capital loss or a reduction in income
> Among other things, the value of the Projects may
be influenced by changes in inflation, interest rates,
government policy, rental levels, land values, supply of
competing product, demand for property by investors, the
cost of building, the cost of maintenance and refurbishment,
and property market vacancy levels generally
> Default by tenants or purchasers or contractors on their
obligations may reduce the income available to the Fund
> Each of the Projects is subject to town planning controls.
In some circumstances (and in particular with respect to
Oran Park and Richlands), the Fund’s strategy is to obtain
amendments to the zoning or planning approvals. There
is no guarantee that the desired planning outcome will
be achieved within the anticipated timeframe, or at all.
Unfavourable planning outcomes may detrimentally affect
the future value of the Asset Portfolio. With respect to Oran
Park and Richlands, the rezoning strategy of the Fund
is considered by VCML to be consistent with publicised
strategies of the respective responsible authorities for
those properties
The nature of the interest VOF is acquiring in the Noosa
North Shore Project is a secured subordinated debt to the
senior financier and is subject to the rights of the senior
financier under a deed of priority and postponement. In
particular, those arrangements ensure the senior lender has
priority up to an amount of $29 million plus interest, fees,
charges and other expenses and allows the senior financier
to control enforcement for so long as those amounts are
outstanding. If there are insufficient proceeds to pay out the
senior financier, then VOF might not recover its investment in
the project.
> The cost of incentives and commissions required in
order to lease vacant space to tenants and to sell Projects
may increase
Risk to the Fund’s Operating Expenses
> The rate at which potential purchasers capitalise
income to derive a value for property investments may
change, thereby having an adverse impact on the values
of the Projects
> The illiquid nature of property investment and
development means that it may not be possible to sell the
Projects at the expected time or on the expected terms
52
> Time delays may lead to increased interest costs and
reduced returns.
Preferred Equity Investment in Noosa North Shore
> The Fund’s expenses or inflation rates may be greater
than anticipated, adversely impacting the net income of
the Fund.
Limited Liquidity
> There is no formal secondary market for the buying and
selling of Units in unlisted trusts. Investors may not be able
to exit their investment during the course of the Investment
Term unless they are able to find a buyer and negotiate a sale
price for their Units. A transfer of Units may involve stamp
duty and other costs as well as having tax implications.
Risks Relating to Debt
Regulatory and Taxation Risks
> The Fund has used, or will use, debt to fund Projects of
between 60% and 80% of the total costs of the Projects. The
presence of leverage through the use of debt finance can
magnify the gains and losses of equity holders. Due to the
use of debt it is possible that a reduction in the value of a
Project could result in the equity capital invested by the Fund
in that Project being lost
> It is not uncommon for property investments to be
exposed to a variety of legal and legislative risks. These could
include, but are not limited to, failure to achieve rezoning,
delays in obtaining approvals, unforeseen environmental
issues, native title claims and litigation. These risks are
particularly pertinent to the Asset Portfolio given Valad’s
plans for its repositioning and development
> Debt financed Projects are typically governed by detailed
legal documents. As a result, the risk of dispute over their
interpretation, enforceability or effect may be higher than for
other investments
> Changes in laws and government policy, including
taxation laws, may affect future earnings, the attainability
of target returns and the overall attractiveness of an
investment in the Fund
> The Fund’s debt finance will be secured by a mortgage
over the Fund’s properties (among other things). In the event
of a default, a financier may be entitled to enforce its security,
which may lead to a sale of the property at a time earlier than
required to realise the project’s optimum return. The timing
of the financier sale may not realise the full potential value of
the Project
> The taxation rules governing any investment in the Fund
may change during the life of the Fund. Both the level and
basis of taxation may change
> Changes to the availability of borrowings and the level of
interest rates required by lenders may result in the Projects
paying more interest than anticipated in the feasibility
analysis for those Projects, thereby impacting Unitholders’
returns
> Unexpected capital expenditure may increase the cost of
completing the Fund’s Projects. There is no guarantee that
debt will be available on attractive terms, or at all, to meet
any costs which have not been budgeted
> Although not expected, if the Fund requires an overdraft
facility to meet short-term cash requirements, the
establishment fees and monthly interest expense of such
a facility would adversely affect the Fund’s after-tax profits.
Any establishment fees and interest expense would be paid
out of the Fund’s assets
> While an indicative letter of offer for debt finance has
been provided with respect to Oran Park, the Responsible
Entity has not yet received notification of all credit approvals,
met all conditions precedent and executed documentation
required for this loan. While the Responsible Entity expects
to be able to achieve this, there is no guarantee that debt will
be available to meet the cost of acquiring Oran Park when
settlement is due.
> The taxation effects of an investment in the Fund may
vary between investors. Each investor is encouraged to seek
professional tax advice in connection with any investment in
the Fund.
Stamp Duty Risk
The Fund will own property in New South Wales, Queensland
and Victoria and is a “land rich trust” for the purposes
of the stamp duty legislation in New South Wales and
Victoria. Unless an exemption applies, issues, transfers and
redemptions of units in the Fund may attract duty at the rate
applicable to dealings in the underlying real property in the
jurisdiction (currently a maximum rate of 5.5% in New South
Wales and Victoria and 4.5% in Queensland) calculated by
reference to the market value of the underlying real property.
In New South Wales and Victoria any dealing in units which
does not result in any investor (together with its associates)
holding 20% or more of the Fund will not be liable to any
stamp duty. VCML will not knowingly allow any investor to
hold 20% or more of the Fund (other than NAB pursuant
to the underwriting agreement or Valad itself). During the
life of the Fund there is a risk that land transfer rate stamp
duty could be payable in Queensland on transfers of Units
if the Fund ceases to meet the test in Queensland for widely
held (that is, public) unit trusts. VCML will endeavour to
ensure that the Fund meets this test and the corresponding
exemptions in New South Wales and Victoria at all times
during the life of the Fund when property in the State
concerned is held in the Fund.
53
Other Risks
Unforeseen Environmental Issues
> War or terrorist attacks may occur and insurance cover
may not be available at reasonable premiums to cover the
Fund’s property and developments for such occurrences.
Unforeseen environmental issues may affect any of the
Projects. These liabilities may be imposed irrespective of
whether or not the Fund is responsible for the circumstances
giving rise to the liability.
> Force majeure events, which are events beyond the
control of a party, including fire, bushfire, flood, earthquake,
and other acts of God, as well as war, strike and terrorist
acts, may affect a party’s ability to perform its contractual
obligations or may lead to a capital loss or a reduction
in income.
Reliance on Responsible Entity and Development Manager
Unitholders will have no control over the day-to-day
operations and investment decisions of the Fund, and
must rely on the Responsible Entity and its related entities.
The Fund’s success depends largely on the performance
of the Responsible Entity and service providers including
the Development Manager. The loss of key personnel of
the Responsible Entity could have an adverse effect on
investment performance of the Fund.
Disputes and Defaults
In the ordinary course of its operations, the Fund may be
involved in disputes and possible litigation. The extent of
those disputes and litigation cannot be ascertained at this
time but there exists a risk that a material or costly dispute
or litigation could affect the value of the assets or expected
income of the Fund.
There is also a possibility that tenants or other persons
may default on their obligations to the Fund, which may
lead to a loss of income and increased costs as a result
of enforcement action being required.
Due Diligence and the Use of Experts
The Responsible Entity has engaged various experts to
investigate various physical, market and legal aspects
of the properties. However, despite such investigations,
the Responsible Entity cannot guarantee the identification
and mitigation of all risks associated with the properties.
54
The Fund may also be required to remediate sites affected
by environmental liabilities. The cost of remediation of sites
could be substantial. In addition, if the Fund is not able to
remediate a site properly, this may adversely affect its ability
to sell the relevant property or to use it as collateral for
borrowing.
Material expenditure may also be required to comply with
new or more stringent environmental laws or regulations
introduced in the future.
> 7 FEES AND
OTHER COSTS
> 7 FEES AND OTHER COSTS
7.1 Consumer Advisory Warning
The following statement is prescribed by current legislation.
DID YOU KNOW?
Small differences in both investment performance and fees and costs can have a substantial impact on your long-term
returns.
For example, total annual fees and costs of 2% of your fund balance, rather than 1%, could reduce your final return
by up to 20% over a 30-year period (for example, reduce it from $100,000 to $80,000).
You should consider whether features such as superior investment performance or the provision of better member
services justify higher fees and costs.
You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask the fund
or your financial adviser.
TO FIND OUT MORE
If you would like to find out more, or see the impact of the fees based on your own circumstances, the Australian Securities
and Investments Commission (ASIC) website (www.fido.asic.gov.au) has a managed investment fee calculator to help you
check out different fee options.
56
7.2 Fees and Other Costs
This section shows fees and other costs that you may be charged. These fees and costs may be deducted from your money,
from the returns on your investment or from the assets of the Fund as a whole.
Taxation information is set out in another part of this PDS (refer to Section 9.3).
You should read all of the information about fees and costs because it is important to understand their impact on your investment.
TYPE OF FEE OR COST
AMOUNT (INCLUDING GST
LESS ANY REDUCED INPUT TAX CREDITS)
HOW AND WHEN PAID
Fees When your Money Moves In or Out of the Fund
Establishment Fee
Nil
Not applicable
The fee to open your investment.
Contribution Fee
Nil
Not applicable
The fee on each amount contributed
to your investment.
Withdrawal Fee
Nil
Not applicable
The fee on each amount you take out
of your investment.
Termination Fee
Nil
Not applicable
The fee to close your investment.
Management Costs: The Fees and Costs for Managing your Investment
Offer Costs
Sole Arranging Fee
$1.26 million (5% of the amount of
capital raised11 under the Offer plus
out of pocket expenses)
Underwriting and Issue Management
Fees
Other Issue Expenses
Responsible Entity Fees
Annual Management Fee
Fund Administration Costs12
$0.718 million (1.5% of the
underwritten amount plus 0.35% of
the gross value of the Fund’s assets
plus out of pocket expenses)
Estimated at $0.928 million
0.205% per annum of the gross value
of the Fund’s assets
Estimated at approximately 0.68% per
annum of the Fund’s pro-forma net
assets upon Allotment
Payable to NAB from the assets of the
Fund, on completion of the Offer. NAB will
meet the cost of distribution commissions
from this fee
Payable to NAB from the assets of the
Fund, on completion of the Offer
Payable to various parties, such as Valad,
lawyers, accountants, valuers, printers ,
advisers and other providers of services
(including other Valad entities) as incurred
out of the Offer proceeds
Calculated monthly, and paid to the
Responsible Entity monthly in arrears from
the Fund’s assets
Paid or reimbursed to the Responsible
Entity or a third party service provider from
the Fund’s assets when incurred
11 Assumes that $25.17 million of capital is distributed by NAB.
12 Refer to Section 7.4.1.
57
TYPE OF FEE OR COST
Development Management Fees13
Acquisition Fee
AMOUNT (INCLUDING GST
LESS ANY REDUCED INPUT TAX CREDITS)
1.025% of the amount invested into the
Noosa North Shore project and the
outstanding amount on Oran Park to
be paid at settlement
0.76875% per annum of the gross
value of the Fund’s properties
Development Fee
5.125% of the amount of development
costs incurred on the Fund’s projects14
Debt Arrangement Fee
0.5125% of the amount of debt facilities
procured for the Fund’s projects
Disposal Management Fee
1.025% of the gross sales proceeds
of each of the Fund’s projects
Performance Fee15
50% of the surplus profit, after
deduction of all fees and costs, above
the amount of profit which is required
to provide the Fund with a pre-tax IRR
of 17% for that particular project
Service Fees
Investment Switching Fee
Nil
HOW AND WHEN PAID
Paid to the Development Manager from
the Fund’s assets upon completion of the
investment into the Noosa North Shore
project and the settlement of Oran Park
Calculated monthly, and paid to the
Development Manager monthly in arrears
from the Fund’s assets
Paid to the Development Manager from the
Fund’s assets at the time the development
costs are incurred
Paid to the Development Manager from
the Fund’s assets upon drawdown of the
relevant debt facility
sale proceeds of the relevant project at the
time of completion of the sale
sale proceeds of the relevant project upon
completion of the disposal of a portion or
all of the project
Not applicable
The fee for changing investment
options.
13 These fees are for various services in relation to asset identification and due diligence, development services, repositioning, leasing, marketing and sale of the
Fund’s assets.
14 The Development Manager will not be paid a development management fee in relation to the Noosa North Shore investment while Petrac acts as development
manager for that project.
15 Refer to Section 7.4.2 for an example and further information about the Development Manager’s performance fee.
58
7.3 Example of Annual Fees and Costs
This table gives an example of how the fees and costs for the Fund can affect your investment over a one-year period. You should
use this table to compare this product with other managed investment products.
Figure 7.1 First Year after Close of the Offer
BALANCE OF $50,00016
Management Costs
Offer Costs
Sole Arranging Fee
$1.26 million (5% of the amount of
capital raised under the Offer plus
out of pocket expenses)
For every $50,000 you have in the Fund you
will be charged $1,614.58
Underwriting and Issue
Management Fees
$0.718 million (1.5% of the
underwritten amount plus 0.35% of
the gross value of the Fund’s assets
plus out of pocket expenses)
will be charged $922.31
Other Issue Expenses
Estimated at $0.928 million
will be charged $1,190.58
0.205% per annum of the gross value
of the Fund’s assets
Estimated at approximately 0.68%
per annum of the Fund’s pro-forma
total net assets upon Allotment
For every $50,000 you have in the Fund,
you will be charged $244.78
you will be charged approximately $320.75
1.025% of the amount invested into the
Noosa North Shore project and the
outstanding amount on Oran Park to be
paid at settlement
0.76875% per annum of the gross
value of the Fund’s properties17
5.125% of development costs incurred
Responsible Entity Fees
Fund Administration Costs
Development Management Fees
Acquisition Fee
Development Fee
Debt Arrangement Fee
Disposal Management Fee
Performance Fee
EQUALS Cost of the Fund
16
17
18
19
20
0.5125% of the amount of debt facilities
procured for the Fund’s projects18
1.025% of the amount of asset
disposals
50% on net profit for each project above
a 17% project IRR
For every $50,000 you have in the Fund
For every $50,000 you have in the Fund, you
will be charged approximately $64.1520
If you had an investment of $50,000,
you would be charged costs and fees
of $6,262.61
Assumes that gross value of the Fund’s assets is $93.1 million ($88.4 million excluding cash).
The value of the Noosa North Shore project is assumed to be the amount of equity invested by the Fund.
The debt arrangement fee is expected to apply to the procurement of debt for the Oran Park property and facility arrangements for Noosa North Shore.
Assumes $10 million of asset disposals in one year. This is not a forecast with respect to asset sales and should not be relied upon as such.
Assumes an excess performance over a 17% IRR of $100,000.
59
7.4 Additional Explanation of Fees and Costs
A worked example of the performance fee follows:
7.4.1 Fund Administration Costs
Total profit from project x
$5.000 million
Ongoing administration costs may include but are not
limited to:
Profit required to deliver
a pre-tax IRR of 17%
to the Fund
$4.500 million
> establishing and maintaining the register of Unitholders
> preparation of audit, taxation returns and accounts for
the Fund and its subsidiaries
> engagement of agents, valuers, contractors and advisers
(including legal advisers)
> custodian and trustee fees and expenses
Amount of the surplus profit
beyond the benchmark level $0.500 million
Performance fee
= 50% of surplus
$0.250 million
Example of the performance fee rebate:
> compliance committee costs
Total profit from project x
$4.250 million
> expenses associated with Unitholder communications.
Profit required to deliver
a pre-tax IRR of 17%
to the Fund
$4.500 million
Amount required to achieve
the benchmark level
$0.250 million
The amount included in the table in Section 6.2 is an estimate
only and does not limit the ability of the Responsible Entity to
recover any expenses it incurs in the proper performance of
its duties as Responsible Entity for the Fund.
Rebate
7.4.2 Development Manager’s Performance Fee
The Development Manager is entitled to a performance fee
in the event that the returns generated for the Fund from the
realisation of a Project of the Fund exceed the Target IRR of
17%, after allowance for all other fees and expenses. The
performance fee is equivalent to an amount of 50% of the
surplus profit beyond that benchmark level.
As the performance fee is based on future possible events,
there are numerous factors outside of both the Responsible
Entity’s and the Development Manager’s control which may
affect the quantum, if any, of performance fees.
The performance fee becomes due and payable upon the
realisation of any of the Fund’s assets. It is possible that
a performance fee may become due upon the realisation
of one or more of the Fund’s assets, and that one or
more subsequent asset realisations fail to achieve the
performance fee benchmark of a pre-tax IRR of 17%,
after allowance for all other fees and expenses. Should this
occur, the Development Manager will provide a rebate from
previously paid performance fees to the Fund of an amount
that would be required to achieve a pre-tax IRR to the Fund
of at least 17% for that particular project. Such rebate will
be limited to 25% of all performance fees previously paid
by the Fund to the Development Manager.
60
$0.250 million
(subject to this amount
not exceeding 25% of all
performance fees previously
paid to the Development
Manager)
On termination of the Master Development Agreement
VDML may be entitled to performance fees as described
in Section 10.3.
7.4.3 Fees and Expenses of the Offer
Consistent with AIFRS, certain fees and expenses of the Offer
have been deducted from the net asset value of the Fund. The
total amount of fees and expenses of the Offer that have been
deducted from the net asset value of VOF is $2.033 million
(net of deferred tax benefits). The resulting Adjusted NTA
per Unit, based on an Application Price of $1.01 per Unit,
is $0.953 per Unit.
7.4.4 Maximum Fees under the Constitution
Under the Fund’s Constitution, the Responsible Entity is
entitled to a management fee of 0.2% of the gross value of
the Fund’s assets (plus GST) calculated and paid monthly.
It is also entitled to be reimbursed for, or to pay from the
Fund’s assets, all expenses it incurs in relation to the proper
performance of its duties.
7.4.5 Adviser Service Fees
An upfront commission fee may be paid directly to investors’
professional financial advisers by the Responsible Entity
or by NAB from fees it receives for acting as Sole Arranger.
No adviser service fee is payable following a transfer of
Units. There are no other adviser service fees associated
with the Fund and any amounts that investors agree to pay
to their financial adviser for financial advice are separate
to the fees charged by the Responsible Entity.
7.4.6 Differential Fees
The Responsible Entity may negotiate investor specific fees
with wholesale investors, such as master trusts or wrap
account platforms. Charging differential fees will be subject
to compliance with legal requirements and the conditions of
any applicable ASIC relief. Wholesale investors can contact
the Responsible Entity or Sole Arranger on the contact
details set out in the Directory.
7.4.7 Taxation and Goods and Services Tax
For a general overview of the impact of taxation on an
investment in the Fund, refer to the Taxation Report in
Section 9.3.
All fees and charges in this section are quoted inclusive of
GST net of any reduced input tax credits to which the Fund is
entitled, unless otherwise stated.
61
> 8 FINANCIAL
INFORMATION
This section provides details of the:
Figure 8.1 Sources and Uses of Funds
> Sources and uses of funds
> Pro-forma Consolidated Balance Sheet of the Fund
at Allotment
LOW
CAPITAL
RAISE
$’000
HIGH
CAPITAL
RAISE
$’000
EXPECTED
CAPITAL
RAISE
$’000
22,570
27,294
26,164
7,857
7,857
7,857
30,427
35,151
34,021
> Target IRR.
Sources of funds
The Directors of VCML can give no assurance that the Target
IRR will be achieved or that investors’ equity capital will be
returned. This is because the Fund’s actual performance will
be affected by many factors that are beyond the Directors’
control. Some of these factors are set out under Significant
Potential Risks of the Fund in Section 6.2.
Capital raising
Deloitte has reviewed the Consolidated Balance Sheet of
the Fund at 31 March 2007, the Pro-forma Consolidated
Balance Sheet of the Fund at Allotment and the Adjusted
Pro-Consolidated Balance Sheet of the Fund at Allotment as
set out in Section 8.2 (together the “Financial Information”)
and its report is set out in Section 9.2.
Redemption of Unitholders
under the Withdrawal Offer
16,031
27,294
21,180
Acquisition of Noosa
North Shore
10,100
3,800
8,800
Capital raising costs
2,716
2,930
2,891
Additional working capital
1,580
1,127
1,150
Total applications of funds
30,427
35,151
34,021
Adjusted NTA
$0.958
$0.947
$0.953
8.1 Sources and Uses of Funds
The total amount of the capital raising for the Fund is variable
as it is dependent upon whether existing Unitholders elect
to redeem their units under the Withdrawal Offer. It is not
possible to determine the exact level of redemptions and
consequently the number of Units that need to be issued
under the PDS ahead of the close of the Withdrawal Offer.
In order to gain an understanding of the upper and lower
levels of new Units likely to be needed to fund redemptions,
VCML examined the register of VOF Unitholders and
determined those investors that:
> are likely to accept the Withdrawal Offer (namely those
investors who usually do not hold unlisted Units under
their investment mandates – at a minimum expected to
be 15.9 million units), and
> have indicated that they wish to remain in the Fund
(namely Valad and its Directors).
From this analysis VCML has been able to determine with
a reasonable level of certainty the likely maximum and
minimum level of the capital raising. As noted in Section
2.4, flexibility in the size of the investment in Noosa North
Shore is being used to manage the size of the capital raising
within this prescribed range. From this analysis VCML
estimates that the capital raising will fall within the range
of $22.570 – $27.294 million and is targeting a raising of
$26.164 million based on the expected level of redemptions.
Sale proceeds from
Erskine Park
Total sources of funds
Applications of funds
8.2 Consolidated Balance Sheet
8.2.1 Pro-forma Consolidated Balance Sheet
The Pro-forma Consolidated Balance Sheet of the Fund at
Allotment has been prepared based on the Consolidated
Balance Sheet of the Fund at 31 March 2007 assuming the
occurrence of the pro-forma adjustments listed below
as at Allotment Date including the exercise of VOF’s call
option in relation to Oran Park which is due for exercise
at December 2007.
8.2.2 Adjusted Pro-forma Consolidated Balance Sheet
The Adjusted Pro-forma Consolidated Balance Sheet at
Allotment reflects the Pro-forma Consolidated Balance
Sheet of the Fund at Allotment adjusted to reflect the market
value of property inventory at 31 March 2007. The uplift in
property values is supported by valuation reports set out in
this PDS in Section 9.1. In addition, a deferred tax liability and
an accrual for performance fees has been assumed based
on these increases in value.
The value of the Asset Portfolio may change between the
date of this PDS and 30 June 2007. VCML will seek to obtain
confirmation from the valuers as to the updated valuation
at the time of calculation of the redemption price under the
Withdrawal Offer.
63
> 8 FINANCIAL INFORMATION
Figure 8.2 Pro-forma Consolidated Balance Sheet
CONSOLIDATED
BALANCE SHEET
AS AT
31 MARCH 07
$’000
Current assets
PRO-FORMA
ADJUSTMENTS
PRO-FORMA
CONSOLIDATED
BALANCE SHEET
AS AT
ALLOTMENT
NOTES
$’000
ADJUSTED
PRO-FORMA
CONSOLIDATED
BALANCE SHEET
AS AT
ALLOTMENT*
$’000
(Reviewed)
Cash
Receivables
Investment in associates
Other financial assets (Oran Park)
14,211
424
52
2,144
(9,561)
–
–
(2,144)
1
Total current assets
16,831
(11,705)
Investment in associates
Loan receivable
Deferred tax asset
Property inventory
7,857
–
1,173
51,530
(7,857)
8,800
867
22,657
Total non-current assets
60,560
24,467
85,027
87,940
Total assets
77,391
12,762
90,153
93,066
Payables
Current tax liabilities
Interest bearing liabilities
Provisions
381
3,420
891
718
132
(2,944)
–
(718)
513
476
891
–
1,603
149
891
–
Total current liabilities
5,410
(3,530)
1,880
2,643
Interest bearing liabilities
Deferred tax liabilities
38,455
1,183
12,832
–
51,287
1,183
51,534
1,983
Total non-current liabilities
39,638
12,832
52,470
53,517
Total liabilities
45,048
9,302
54,350
56,160
Net assets
32,343
3,460
35,803
36,906
Contributed equity
Retained earnings
Capital reserve
31,210
3,681
(2,548)
4,764
(2,885)
1,581
35,974
796
(966)
35,974
1,898
(966)
Total equity
32,343
3,460
35,803
36,906
Number of units outstanding
33,777
4,935
NTA
$0.958
2
4,650
424
52
–
4,650
424
52
–
5,126
5,126
–
8,800
2,040
74,187
–
8,800
2,040
77,100
Non-current assets
3
4
5
6
Current liabilities
7
8
9
Non-current liabilities
10
Equity
11
11
11
38,712
38,712
$0.925
$0.953
* Reflects the Pro-forma Consolidated Balance Sheet of the Fund at Allotment adjusted to reflect the estimated market value of property inventory based
on valuations at 31 March 2007 (and 31 December 2006 for MIAC), resulting accrual of performance fees and deferred tax liability.
64
8.3 Notes to the Pro-forma Consolidated
Balance Sheet
1) See Notes 3, 4, 6, 8, 9, 10 and 11 below.
2) VOF owns a call option on Oran Park exercisable in
December 2007. For the purposes of the Pro-forma
Consolidated Balance Sheet it has been assumed that
this has been exercised at allotment. The assumed
settlement transfers the current interest in Oran Park
to Property inventory. The outstanding balance payable
in relation to Oran Park of $18.6 million (including stamp
duty of $1.0 million and acquisition costs of $0.5 million)
is assumed to be financed through $13.3 million of debt
and $5.3 million of cash.
3) Assumed sale of Erskine Park at market from the
Fund, sold to VFML. Sale price will be supported by
two independent valuations.
4) Assumed investment in Noosa North Shore of $8.8 million
being the purchase of a preferred equity interest funded
by cash. The size of the Fund’s investment in Noosa North
Shore will depend on the level of redemptions and capital
raised as noted in Section 8.1 above.
5) Deferred tax asset recorded on issue costs associated
with the Offer being the costs available for deduction
against income tax provision in future financial years.
6) Assumed settlement of the balance of Oran Park for
$18.6 million and resulting transfer from other assets
to Property inventory ($2.1 million) and capitalisation
of assumed development costs of $1.9 million, on all
Properties for the three months to 30 June 2007 including
interest, consulting and refurbishment cost net of rent
received for the period.
PROPERTY INVENTORY
COMPRISES THE FOLLOWING:
BOOK VALUE
AS AT
31 MARCH 2007
ADJUSTED
PRO FORMA
AT ALLOTMENT
BASED ON
PRO FORMA VALUATIONS AT
AT ALLOTMENT 31 MARCH 2007
Melbourne International
Airfreight Centre
Minchinbury Hometown
Oran Park
Richlands
$23.1m
$18.9m
$2.1m(iii)
$9.6m
$23.8m
$19.4m
$20.9m
$10.1m
$24.2m(i)
$17.5m(ii)
$24.0m
$11.4m
Total
$53.7m
$74.2m
$77.1m
(i) Valuation as at 31 December 2006.
(ii) The valuation at 31 March 2007 is below book value as the valuation
represents the value the asset could be sold at in its current
condition. The book value represents the lower of cost (including
capitalised interest and stamp duty) and net realisable value. Based
on project feasibility analysis, the carrying value at 31 March 2007
(and the pro-forma carrying value at Allotment) is believed to be
recoverable over the life of the project.
(iii) Represents deposit paid held as a current asset as the option is
exercisable within 12 months of the issue of the option.
7) Accrual for the acquisition fees payable to the
development manager in relation to the investment
in Noosa North Shore.
8) Assumed payment of accrued tax for the year ended
30 June 2006 net of tax liability associated with
performance fee clawback for Erskine Park.
9) Assumed payment of the accrued March distribution.
10)Assumed drawdown of $13.3 million on Oran Park
settlement less repayment of $0.468 million associated
with a GST facility for Richlands.
11) Assumed redemption of 21.0 million existing Units
and issue of 25.9 million new Units in the Fund based
on redemption price of $1.01 and issue price of $1.01
net of issue costs of $2.9 million. The assumed volume
of redemptions is based on management’s best
estimate assumptions through discussion with existing
institutional Unitholders and knowledge of other current
Unitholder base. Redemptions received are assumed to
reduce contributed equity by $19.4 million and will also
include payments out of retained earnings ($3.4 million)
and an increase to capital reserve ($1.6 million).
The level of Units issued and capital raised will depend
on the actual level of redemptions received. The assumed
capital raised above reflects management’s best estimate
of the likely level of redemptions that will be received as
described in Section 8.1.
65
> 8 FINANCIAL INFORMATION
The movement in retained earnings also reflects the
assumed cost of delisting to be borne by the Fund and the
clawback of $960,000 of performance fees (tax-effected)
as a result of the sale of Erskine Park at market.
8.4 Net Asset Backing
Following completion of the Offer, the Adjusted Net Tangible
Asset value per Unit is expected to be $0.953, after taking
account of the market value of the Fund’s investments
and the future income tax benefit arising from the up-front
write-off against equity of items associated with raising
capital under the Offer. This compares with the Issue
Price of $1.01 per Unit.
8.5 Distributions
VCML intends to make distributions of capital and income
upon the receipt of proceeds from the sale of individual
Projects after provision for taxation and liabilities. For
Projects where the asset is to be sold as a whole this return
will represent the full value of the asset at that time (such as
MIAC or Richlands). For projects where the value realisation
is to be a staged sales process (such as Minchinbury or
Noosa North Shore) this distribution will be upon sale of
specific sites/tenancies.
At the termination of the Fund, all remaining retained
after-tax profits and capital will be distributed to Unitholders.
8.6 Target IRR
VCML is targeting for Unitholders to meet or exceed a 17%
internal rate of return before tax and after fees and expenses.
In order to align the interests of VCML with investors, a
performance fee on each asset is payable only on profits
received in excess of the Target IRR.
Investors should note that the Target IRR is not a forecast
return or an indication of likely future returns for the Fund
and should not be relied upon as such. It is a benchmark
return which the Responsible Entity aims to meet or exceed,
and against which the Fund’s performance will be measured
by the Responsible Entity. Investors should be aware that
property development and repositioning activities are by
nature more risky than other types of property investments
and should refer to the specific risks associated with these
activities as outlined in Section 6.2.
66
8.7 Key Accounting Policies
The Financial Information in this section has been prepared
in accordance with the Constitution and Australian
Accounting Standards. The Pro-forma Consolidated Balance
Sheets are presented in an abbreviated form insofar as they
do not comply with all the disclosures required by Australian
Accounting Standards applicable to annual reports prepared
in accordance with the Corporations Act.
The principal accounting policies are described below:
(i)
Acquisition of Assets
All assets acquired including property, are initially recorded
at their cost of acquisition at the date of acquisition, being the
fair value of the consideration provided plus incidental costs
directly attributable to the acquisition.
The costs of assets constructed or internally generated by
the entity will include costs of materials and direct labour.
Directly attributable overheads and other incidental costs
are also capitalised to the asset. Borrowing costs are
capitalised as set out in note (iv).
Costs incurred on assets subsequent to initial acquisition are
capitalised when it is probable that future economic benefits
in excess of the originally assessed performance of the asset
will flow to the entity in future years. Costs that do not meet
the criteria for capitalisation are expensed as incurred.
(ii)
Inventories
Development properties are carried at the lower of cost and
net realisable value. Cost includes the cost of acquisition
and development and holding costs such as rates, taxes and
interest incurred (net of rental income) from commencement
of construction until the point of time that the property is
ready for sale.
(iii)
Impairment
At each reporting date, the entity reviews the carrying
amounts of its tangible assets to determine whether there is
an indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of
the assets is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the entity
estimates the recoverable amount of the cash-generating
unit to which the asset belongs.
The recoverable amount is the higher of fair value less
costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash
flows have not been adjusted. If the recoverable amount of
an asset is estimated to be less than its carrying amount,
the carrying amount of the asset (cash generating unit) is
reduced to its recoverable amount. An impairment loss is
recognised in profit or loss immediately.
Where an impairment loss subsequently reverses, the
carrying amount of the asset is increased to the revised
estimate of its recoverable amount, but only to the extent that
the increased carrying value does not exceed the carrying
amount that would have been determined had no impairment
loss been recognised for the asset in prior years. A reversal of
an impairment loss is recognised in profit or loss immediately.
(iv)
Borrowings
Borrowing costs include interest and amortisation of
discounts or premiums relating to borrowings. Borrowing
costs directly attributable to assets under construction
are capitalised as part of the cost of those assets.
(v)
Goods and Services Tax
The Fund is registered for GST purposes and will receive
input tax credits for GST paid. Revenues, expenses and
assets are recognised net of the amount of goods and
services tax (GST), except where the amount of GST is not
recoverable from the Australian Tax Office (ATO). In these
circumstances the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense. The net
amount of GST recoverable from, or payable to, the ATO is
included as a current asset or liability in the balance sheet.
Receivables and payables are recognised inclusive of GST.
(vi)
Units Issued
Issued and paid up Units are recognised at the fair value
of the consideration received by the Responsible Entity.
Any transaction costs arising on the Issue of the Units
are recognised directly in equity as a reduction of the Unit
proceeds received. Debt and equity instruments issued
by the Fund are classified as either liabilities or as equity
in accordance with the substance of the contractual
arrangements. Issued Units are classified as equity
in accordance with AASB 132 Financial Instruments:
Disclosure and Presentation.
(vii) Income Tax
Current tax – current tax is calculated by reference to the
amount of income taxes payable or recoverable in respect
of the taxable profit or tax loss for the period. It is calculated
using tax rates and tax laws that have been enacted or
substantially enacted by reporting date. Current tax for
current or prior periods is recognised as a liability (or asset)
to the extent it is unpaid (or refundable).
Deferred tax – deferred tax is accounted for using the
comprehensive balance sheet liability method in respect
of temporary differences arising from differences between
the carrying amount of assets and liabilities in the financial
statements and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all
taxable temporary differences. Deferred tax assets are
recognised to the extent that it is probable that sufficient
taxable amounts will be available against which deductible
temporary differences or unused tax losses and tax offsets
can be utilised. However, deferred tax assets and liabilities
are not recognised if the temporary differences giving rise to
them arise from the initial recognition of assets and liabilities
which affects neither taxable income nor accounting profit.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period(s) when the
asset and liability giving rise to them are realised or settled,
based on tax rates (and tax laws) that have been enacted or
substantively enacted by reporting date. The measurement
of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which
the entity expects, at the reporting date, to recover or settle
the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they
relate to income taxes levied by the same taxation authority
and the entity intends to settle its current tax assets and
liabilities on a net basis.
Current and deferred tax for the period – current and
deferred tax is recognised as an expense or income in the
income statement except when it relates to items credited
or debited directly to equity, in which case the deferred tax
is also recognised directly in equity.
67
> 9 EXPERTS’
REPORTS
9.1 Independent Valuer’s Report
MK:kw2
50996/18859
17 April 2007
The Directors
Level 9, 1 Chifley Square
SYDNEY NSW 2000
Dear Sirs
RE:
MELBOURNE INTERNATIONAL AIRFREIGHT CENTRE
1 INTERNATIONAL DRIVE, TULLAMARINE, VICTORIA
INSTRUCTIONS
We refer to your instructions requesting m3property to undertake a current Market Valuation of
Melbourne International Airfreight Centre, 1 International Drive, Tullamarine, Victoria (“subject
property”).
We have completed a valuation and report of the subject property dated 31 December 2006
and provide this abridged summary for inclusion in the Product Disclosure Statement (“PDS”).
For further information reference should be made to the full valuation report.
VALUATION SUMMARY
In our opinion, subject to the qualifications and assumptions contained within our valuation
report, we assess the Market Value of Melbourne International Airfreight Centre, 1 International
Drive, Tullamarine, Victoria exclusive of GST, subject to the existing and proposed lease
agreements, as at 31 December 2006, to be:
$24,200,000
(TWENTY FOUR MILLION TWO HUNDRED THOUSAND DOLLARS)
m3property (Vic) Pty. Ltd.
ABN 99 472 148 297
Level 5/114 William Street
Melbourne Vic 3000
Telephone 03 9605 1000
Facsimile 03 9670 1658
info@m3property.com.au
www.m3property.com.au
69
> 9 EXPERTS’ REPORTS
-2-
BRIEF DESCRIPTION
An office warehouse development constructed over three stages in the 1980’s known as the
Melbourne International Airfreight Centre.
The property comprises a mix of office/warehouse units together with tenancies utilised purely
as office or warehouse space. Warehouses generally range between 270 and 1,400 square
metres while office space generally ranges between 50 and 400 square metres.
The improvements are erected upon an irregular shaped site of 5.238 hectares and the land is
within a ‘Business 3 Zone’. The site has frontage of 375 metres to the Tullamarine Freeway
plus secondary frontage of 94 metres to Mickleham Road.
The subject property is located within the established suburb of Tullamarine, being
approximately 15 kilometres north west of the Melbourne Central Business District.
Surrounding development is largely characterised by a range of commercial uses. Adjoining
the property on its rear or northern boundary is The Age Print Centre. Adjacent to the
property’s southern/eastern boundaries are a range of uses including fast food restaurants and
a service station. Immediately opposite the property on Mickleham Road is Gladstone Park
Shopping Centre. Development further east is largely residential in nature.
TENANCY DETAILS
A multi tenanted estate of which 13,653 square metres or 57% is occupied at the date of
valuation. The lease expiry on an area weighted basis is 1.25 years and 2.23 years on an area
weighted basis at the date of valuation.
At the date of valuation we have assessed the net market income of the property to be
$2,017,675 per annum which accounts for adjustments in relation to passing rents which are
below/above market and vacancies.
70
-3-
VALUATION RATIONALE
We have arrived at the Market Value assessment after considering sales evidence and applying
this to the capitalisation of net income, discounted cash flow approach and direct comparison
methods of valuation. Those sales we have relied upon are provided as follows:
Vendor
Purchaser
Sale Price
Sale Date
Zoning
Land Area m2
Year Built
Gross Lettable Area m2
Office Ratio
Site Coverage Ratio
Passing Net Income ($ p.a.)
Average Net Income ($/m2)
Market Net Income ($ p.a.)
Market Net Income ($/m2)
Lessee
Lease Expiry (area weighted)
Analysis & Assumptions
Initial Yield
Analysed Market Yield
Direct Comparison ($/m2)
IRR/Discount Rate
Compound Rental Growth (p.a.)
Terminal Yield
421 Victoria St
Brunswick
418 Sth G'land Hwy
Dandenong Sth
450 Princes Hwy
Noble Park
Wangara Rd
Sandringham
362 Wellington Rd
Mulgrave
ACN 093927283
Australian Unity
$7,450,000
Aug-06
Industrial 1
14,140
1995
8,057
20%
51%
$644,765
$80
$582,177
$72
Tyco Electronics
3.83 yrs
Pomeroy Pacific
Abacus
$5,300,000
Jun-06
Business 3
9,995
2004
5,345
9%
51%
$374,929
$70
$374,929
$70
Norcross P/L
7.75 yrs
Undisclosed
APPF
$13,100,000
Jun-06
Business 3
44,277
1994 & 2006
7,000
12%
16%
$623,427
$89
$514,875
$74
Natra P/L
9.00 yrs
GE Capital
Becton
$13,100,500
Dec-06
Business 3
16,804
mid 1980s & 2005
10,224
8%
60%
$946,715
$93
$842,646
$82
Laserlite Aust.
6.03 yrs
Private Investor
Trinity
$33,350,000
May-06
Business 3
48,000
1980s
18,633
52%
n/a
$2,501,250
$134
n/a
n/a
Various
3.48 yrs
8.65%
8.03%
$925/m²
8.94%
3.07%
8.75%
7.07%
7.07%
$992/m²
8.86%
3.34%
7.50%
4.76%
7.85%
$1,229/m²*
8.75%
3.34%
8.25%
7.23%
6.79%
$1,281/m²
8.43%
3.34%
7.50%
7.50%
tbc
$1,790/m²
not available
not available
not available
Our adopted analysis and valuation of the subject property is outlined as follows:
Capitalisation
IRR/Discount
Terminal
Direct
Market
Rate
7.75%
Rate
9.00%
Yield
8.25%
Comparison
$1,003/m2
Value
$24,200,000
We confirm our rental income forecast is based on our review of the lease documentation and
our own independent enquiries and are considered reasonable in all circumstances as at the
date of valuation. The total adjustment figure under the capitalisation approach of -$1,791,887
is based on present value calculations for rental reversions, downtime, additional income
(telecommunication tower), rent free periods, tenant improvements, leasing commissions and
capital expenditure. All present value calculations have used a discount rate of 8.0%.
71
-4-
DISCLAIMER
We the valuers of m3property Pty Ltd, have prepared this summary. We have been involved
only in the preparation of this summary and the valuation referred to herein, and specifically
disclaim liability to any person in the event of any omission from, or false or misleading
statement included in the PDS other than in respect of the summary and valuation.
m3property Pty Ltd is not licensed to provide financial product advice under Corporations Act
2001. m3property Pty Ltd confirms it has been paid a fee of $15,500 exclusive of GST to
prepare this summary and valuation but that it has not received any other interest whether
pecuniary or not and whether directly or indirectly, nor does it have any association with Valad
Property Group that might reasonably be expected to, or capable of, influencing the provision
of this valuation.
In undertaking our valuation we have relied upon various sources of information. Where
possible, within the scope of our retainer and limited to our expertise as valuers we reviewed
and analysed this information against industry standards. Based upon the review, m3property
Pty Ltd has no reason to believe the information is not fair or reasonable or that material facts
have been withheld. However, m3property Pty Ltd’s enquiries are necessarily limited by the
nature of its role and m3property does not warrant that its enquiries have identified or verified
all the matters which a more extensive examination might disclose. For the purpose of our
valuation, we have assumed that this information is correct.
Neither the whole nor any part of this valuation report summary or any reference thereto may
be included in any published documents, circular or statement or published in any part or in
full in any way without written approval of the form and context in which it may appear.
No liability is accepted for any loss or damage (including consequential or economic loss)
suffered as a consequence of fluctuations in the property market subsequent to the date of
valuation.
m3property Pty Ltd is not related to Valad Property Group and it is therefore independent of
them. m3property Pty Ltd has no interest in the subject property and no personal interest with
respect to the parties involved.
Neither the valuers nor m3property Pty Ltd has any pecuniary interest giving rise to a conflict of
interest in valuing the property.
72
-5-
The valuers nominated within this letter are authorised under the relevant state laws to practice
as a valuer and has in excess of five years continuous experience in the valuation of similar
properties to the subject property.
Yours sincerely
m3property
Michael Kealy B.Bus (Prop) AAPI
Manager - Industrial Services
Martin Reynolds
Director
michael.kealy@m3property.com.au
martin.reynolds@m3property.com.au
73
16 April 2007
The Directors
SYDNEY NSW 2000
Level 18 Angel Place
123 Pitt Street, Sydney NSW 2000
GPO Box 187
Sydney NSW 2001
+61 (0) 2 9036 6666
+61 (0) 2 9036 6770 fax
www.knightfrank.com.au
Dear Directors
RE:
Valuation:
Minchinbury Hometown, Great Western Highway, Colyton, NSW
Instructions
We refer to your instructions requesting Knight Frank Valuations to prepare a market valuation of the abovementioned
property for inclusion in a product disclosure statement as at 31 March 2007 on the following bases:
x
x
Market Value of the freehold interest subject to the existing leases, and
Current Market Value of the Gross Realisation “as if complete” of the property on the basis of strata subdivision
assuming full vacant possession and sale of individual lots as at the date of valuation and all costs of enabling
strata subdivision are expended.
In accordance with the Corporations Law, Current Market Value means the estimated amount for which an asset
should exchange on the date of valuation, taking into account the value of all estates in that property, and based on the
price at which the property might reasonably be expected to be sold at the date of the valuation, assuming:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
a willing, but not anxious, buyer and seller;
a reasonable period within which to negotiate the sale having regard to the nature and situation of the
property and the state of the market for property of the same kind;
that the property was reasonably exposed to the market;
that no account is taken of the value or other advantage or benefit, additional to market value, to the
buyer incidental to ownership of the property being valued;
that the trust has sufficient resources to allow a reasonable period for the exposure of the property for
sale; and
that the trust has sufficient resources to negotiate an agreement for sale of the property.
In formulating our valuation, we have relied upon property information provided by Valad Funds Management,
including, but not limited to the following:
x
x
Tenancy schedule; and
Budgeted outgoings for the year ending 30 June 2007
Where possible, within the scope of our retainer and limited to our expertise as valuers, we have reviewed this
information including by analysis against industry standards. Based upon that review, we have no reason to believe
that the information is not fair and reasonable or that material facts have been withheld. However, our enquiries are
necessarily limited by the nature of our role and we do not warrant that we have identified or verified all of the matters
which a full audit, extensive examination or “due diligence” investigation might disclose.
Our valuation is conditional on the following:
x
x
x
x
x
All leases are registered on title;
There are no encumbrances or interests in title which materially affect the value, marketability and continued
utility of the property;
There are no encroachments by or onto the subject property that may potentially affect the value or
marketability of the property;
The site is free of contamination;
The improvements are structurally sound and free from asbestos contamination.
Valuations Services (NSW) Pty Ltd ABN: 83 079 862 990, trading under licence as Knight Frank Valuations, is independently
owned and operated, is not a member of and does not act as agent for the Knight Frank Group.
TM
Trade mark of the Knight Frank Group used under licence.
74
VALAD COMMERCIAL MANAGEMENT LIMITED
We have disregarded the presence of any mortgage or other financial liens pertaining to the property.
We also note that the valuations are current as at the date of valuation only we can give no guarantee that the
properties or valuations have not altered since the date of valuation.
For further information, reference should also be made to our Valuation Report dated 23 June 2006 which can be
inspected at the office of Valad Commercial Management Limited during normal business hours. This correspondence
is subject to and should be read in conjunction with all qualifications, assumptions, conditions and disclaimers
contained within that report.
Valuation Summary
We have assessed the market value of the property on each basis as follows.
Basis
Valuation as at 31 March 2007 (GST exclusive)
Market Value
$17,500,000
Gross Realisation “as if complete”
$30,500,000
Brief Description of the Property
The property comprises a “first generation” bulky goods retail centre situated to the south of the Great Western
Highway approximately 65 metres east of the intersection with Colyton Road. The property is bound by Sterling Road
to the rear of the site. Colyton is located 19 kilometres west of the Parramatta CBD and 41 kilometres west of the
Sydney CBD.
The property was developed in 1988 as an open centre in ten separate buildings providing predominantly single level
retail accommodation and two storey accommodation within two of the buildings fronting Sterling Road. The ten
buildings are connected, in some instances, by awnings and are arranged around the perimeter of the site with the
exception of a central building which houses customer amenities with part formerly used as a café. We are advised the
total gross lettable area (GLA) of the improvements extends to 19,451.3m2
There are a total of 433 marked, on grade car spaces providing as ratio to GLA of 1:45m2. The site coverage is
approximately 36.6% and the perimeters and customer parking areas are fully landscaped.
Tenancy Overview
The property is leased to 21 tenants with a weighted average lease expiry of 0.9 years. Four of the tenancies provide
for outgoings recovery. The property has a 13% vacancy rate by GLA.
Income Profile
We have assessed the net passing income for the property as at the date of valuation to be $1,025,687 per annum.
The passing income is based on our review and analysis of the tenancy information provided. We note that should any
of the information provided be found erroneous or has varied, we reserve the right to review and if necessary, amend
our valuation.
Market Commentary
Bulky goods property yields have firmed substantially over the last five years. Initially, the improvement was enhanced
by a change in sentiment by investors from their earlier perception of the sector as quasi-industrial. This re-rating of
bulky goods has seen the risk premium to regional shopping centres compress by, in the region of 150 basis points
with prime centres commanding yields in the region of 7%. More recently, the movement has followed the general
downward trend experienced throughout the retail property sector. The development of new centres has had an
adverse impact on the trading performance of nearby existing centres where the location and property fundamentals of
the existing centres are flawed. The general yield range for bulky goods retail centres is now in the order of 7% to 8%
although it is not uncommon for yields above and below this range to be achieved for secondary and prime
investments respectively.
Ref: S4792_Prospectus Letter
16 April 2007
Page
2
75
2
It is estimated that the supply of bulky goods centres in Australia increased by 750,000m during 2006. This year on
year increase has been the largest since the development of the sector and, whilst this rate of development will
2
2
decrease, there is in excess of 1,800,000m of proposed schemes in the pipeline with 400,000m due for completion
during 2007.
BIS Shrapnel recorded expenditure growth of 7.5% during 2006 and forecast that growth will be tempered to levels
below 5% over the next three years. It is believed the sector has benefited from a one-off shift to mortgage backed
debts enabling the purchase of “must have” items such as plasma screen TVs. That said, the slowing of the residential
market could result in an increase in renovation activity and new technological advances, coupled with a strong, albeit
declining, A$, could bolster sales activity, particularly in the audio-visual sector. We anticipate there will be continued
slowing in the rental growth of the market as a consequence of declining expenditure with the most marked effect
being experienced by older centres in secondary locations.
Valuation Analysis & Assumptions
The following schedule summarises relevant comparable sales which have been considered in the preparation of our
valuation.
Property
Price
Date
$/m² GLA
Yield
IRR Rate (%)
Warners Bay
$10,800,000
Nov 2006
$2,186
7.95%
8.94%
Thornton Supa Centre, Thornton
$14,500,000
Jun 2006
$1,926
8.09%
8.79%
Homeworks Prospect
$58,750,000
Jun 2006
$2,290
8.00%
8.68%
At Home, Penrith
$55,000,000
Apr 2006
$2,170
9.00%
9.33%
$6,802,500
Mar 2006
$406 (land)
9.00%
N/A
Warners Bay Supa Centre,
431-433 Great Western Highway,
Greystanes
We have also had regard to the acquisition of the subject property in June 2006 at a consideration of $16,500,000
which reflected a yield of 8.07%.
The valuation for Minchinbury Hometown has been determined via the capitalisation of net income approach, with
support from direct comparison methodology.
In our capitalisation approach, we derived a fully leased estimated gross market rental income based on face rentals
for the industrial accommodation as mentioned herein. Outgoings/operating expenses for the first year have been
deducted, resulting in a net market income. The gross market rental and operating expenses were capitalised to arrive
at the estimated market value before adjustment and allowances.
We have adopted a capitalisation rate 7.75% in the capitalisation approach, which has been applied to the assessed
net market income of $1,488,940 per annum.
We have then made the following adjustments:
x
x
x
x
x
An adjustment for rental shortfall calculated until lease expiry being the difference between the estimated gross
face market income until lease expiry and the current passing income and discounted at 9%;
A leasing / incentive allowance for current vacancies of 6 months loss of rent during the letting-up period
together with a 2 month rent free incentive;
Agent’s fees and leasing cost for current vacant space based on 13% of year one gross income;
A lease up allowance for imminent expiries which directly accounts for the risk of those tenants with leases that
expire over the next 24 months. An average vacancy allowance of 6 months with a 50% tenant retention rate
has been adopted in addition to a 5% gross incentive; and
Immediate cost estimate with a present value of $557,409 comprising $400,000 immediate re-decoration and
marketing expenditure and the present value of ongoing annual expenditure equating $5/m2 and make good
2
allowances on expiry of $25/m assuming a 50% tenant retention rate.
76
16 April 2007
Page
3
The assessed value of $17,500,000 (GST exclusive) reflects the following investment parameters:
Initial Yield %
Core Market Yield %
Rate/m² GLA
Rate/m² Land
5.86%
7.75%
$900
$329
In assessing the Gross Realisation of the property on the basis of a strata subdivision, we have made the following
critical assumptions:
x
x
x
Full Vacant Possession assuming sale by individual lots as at the date of valuation;
Full statutory approval has been obtained to enable strata subdivision; and
All costs of enabling strata subdivision are expended.
Sales of industrial strata units in Outer West Sydney represent a range of $1,400/m² - $1,800/m² of gross lettable area
(GLA).Based upon the sales, it is considered that a reasonable rate for the subject property, assuming vacant
possession and statutory approval, would be in the order of $1,750/m² for prominent units fronting the Great Western
Highway to $1,400/m2 overall for shop units with obscured sight lines and the first floor accommodation.
On this basis, and on the assumptions set out above, we consider the Gross Realisation of strata subdivision of the
property to be in the region of $30,000,000 and $31,000,000, and have adopted $30,500,000 (exclusive of GST).
Qualifications & Disclaimers
Knight Frank Valuations have prepared this summary which appears in this PDS for Valad Commercial Management
Limited. Knight Frank Valuations were involved only in the preparation of this summary and the valuations referred to
therein, and specifically disclaim liability to any party in the event of any omission from, or false or misleading
statement included in, the PDS or other document, other than in respect of our valuations and this letter.
Knight Frank has consented to this summary being included in this PDS, but Knight Frank is not providing advice about
a financial product, nor the suitability of the investment set out in this PDS. Such an opinion can only be provided by a
person that holds an Australian Financial Services Licence. Knight Frank Valuations does not hold such a licence and
is not operating under any such licence in providing its opinions of value as detailed in this summary and our valuation
reports.
In the case of advice provided within this report which is of a projected nature, we must emphasise that specific
assumptions have been made which appear reasonable based upon current market perceptions. It follows that any
one of the assumptions set out in the text of this summary may be proved incorrect during the course of time and no
responsibility can be accepted in this event.
This valuation is current at the date of valuation only. The value assessed herein may change significantly and
unexpectedly over a relatively short period (including as a result of general market movements or factors specific to the
particular property). We do not accept liability for losses arising from such subsequent changes in value.
Without limiting the generality of the above comment, we do not assume any responsibility or accept any liability where
this valuation is relied upon after the expiration of three (3) months from the date of valuation, or such earlier date if
you become aware of any factors that have any effect on the valuation.
Knight Frank Valuations has prepared this letter based upon information provided. We have no reason to believe that
the information is not fair and reasonable or that material facts have been withheld and for the purpose of this valuation
we have assumed that the information is correct.
This valuation does not purport to be a site or structural survey of the improvements, nor was any such survey
undertaken. Overall, we have assumed that detailed reports with respect to the structure and service installation of the
improvements both would not reveal any defects or inadequacies requiring significant capital expenditure.
16 April 2007
Page
4
77
Knight Frank Valuations has received fees of $16,500 (inclusive of GST) in connection with the preparation of our
valuation and this summary. The fee is not in any way linked to nor has influenced the opinion of value noted and
Knight Frank Valuations does not have any pecuniary interest in Valad Commercial Management Limited and has
provided this report solely in its capacity as independent professional advisor.
Yours faithfully
KNIGHT FRANK VALUATIONS
MATTHEW J RUSSELL GAPI
Registered Valuer No. VAL011166
Associate Director
78
DAVID M CASTLES AAPI
Director
16 April 2007
Page
5
Colliers International Consultancy and
Valuation Pty Limited
26 April 2007
ABN
88 076 848 112
Level 12 Grosvenor Place
225 George Street
Sydney NSW 2000
The Directors
SYDNEY NSW 2000
PO R61 Royal Exchange NSW 1225
DX 10235
Sydney Stock Exchange
Tel
61 2 9257 0222
www.colliers.com.au
Dear Sirs,
VALAD OPPORTUNTIY FUND No. 11
ORAN PARK HOUSE, 931 COBBITY ROAD, ORAN PARK, NSW
1.
Instructions
In accordance with our formal terms of engagement dated 15 March 2007, Colliers International Consultancy and
Valuation Pty Limited (CICV) have undertaken a valuation of the property described below as at 31 March 2007.
We have provided this abridged report on the property for inclusion in a Product Disclosure Statement (PDS). A
more detailed report (our reference VW3157) is available for perusal at the offices of Valad Commercial
Management Limited (VCML).
We confirm that the valuation is prepared in accordance with the Corporations Act, 2001 (Cth).
2.
Property Summary
The subject property, known as Oran Park House, consists of a large part three (3) storey residence of Georgian
styling and dating from the 1850’s. It is located on 107.19 hectares of land just off Camden Valley Way at
Catherine Field some seven (7) kilometres north-east of Camden and nine (9) kilometres north-west of
Campbelltown.
Whilst the property is currently zoned (1a) Rural “A” and is heritage listed under Camden LEP 48, it is strategically
located within the South West Growth Centre (SWGC), a large area of land slated by the NSW Government under
the Metropolitan Strategy for future urban development. There appears good potential for the subject property
being fast tracked in this context via its inclusion in a Precinct Acceleration Protocol currently being considered by
Government.
The property is located between the Turner Road and Oran Park precincts of the SWGC and our valuation
assessment is based on the assumption that re-zoning is achieved in June 2009, which is considered reasonable
as at the date of valuation. Indications are, subject to further detailed assessment, the property may yield 650
allotments from a development footprint of approximately 55 hectares, whilst still preserving a significant heritage
curtilage and providing large areas of riparian, passive and active open space.
The property is under contract for purchase by the instructing party for $19,025,000 with settlement anticipated in
December 2007. We understand that the purchase negotiations were completed “off market” in mid 2006 and,
since this time, the instructing party has entered into dialogue with the planning authorities to improve the
planning risk.
We have ascribed a current market value to the property on an “as is” basis of $24,000,000 exclusive of GST.
3.
Basis of Valuation
The valuation has been prepared on the basis of Market Value as defined by the International Valuation
Standards Committee (IVSC) and endorsed by the Australian Property Institute (API):“Market value is the estimated amount for which an asset should exchange on the date of valuation between a
willing buyer and a willing seller in an arms length transaction after proper marketing where the parties had each
acted knowledgeably, prudently and without compulsion.”
Our Knowledge is your Property
79
Oran Park House – Valuation Summary
This valuation has been prepared pursuant to various qualifications and assumptions as outlined in our full
valuation report.
4.
Date of Valuation
31 March 2007, based on our site inspections conducted during March 2007.
Due to possible changes in market forces and circumstances in relation to the subject property, the report can
only be regarded as representing our opinion of the value of the property as at the date of valuation.
5.
Valuation Methodology
In determining the market value of the property CICV has examined the available market evidence and utilised a
direct comparison approach as the primary method for our valuation assessment.
This methodology has in turn been checked by a feasibility analysis to derive the residual land value, assuming
the orderly development of the site for residential purposes from June 2009, with retention of heritage and open
space elements.
Our valuation has been undertaken on a GST exclusive basis.
6.
6. Legal Description
The subject property is legally described as being Lots 24, 25 and 26 in Deposited Plan 31996 and Lots 27 and
28 in Deposited Plan 213330 in the Parish of Cook, County of Cumberland, and Local Government Area of
Camden.
The cumulative site area is 107.19 hectares.
7.
Location and Site Particulars
The subject property is of irregular shape with its main access via Cobbitty Road with a smaller frontage to
Camden Valley Way. It is distanced approximately seven (7) kilometres north-east of Camden and nine (9)
kilometres north-west of Campbelltown. The property is bordered by a number of smaller rural/residential style
holdings along its southern boundary and adjoins the substantial Leppington Pastoral Company landholding to the
west.
The subject property is generally cleared and used for grazing and features slight to slight/moderate undulation,
with Oran Park House constructed on top of a ridge at the north western corner of the site. The land is bisected
by the headwaters of South Creek creating a riparian zone and an element of 1:100 year flood prone area through
the middle of the site.
There is an existing water main along Camden Valley Way that will require amplification as the SWGC develops.
Currently the site is not sewered though we understand that, in the context of future residential development,
Sydney Water has a number of temporary and permanent options that still require resolution for this part of the
SWGC area.
Two (2) transmission line easements cross the site in north to south and north to east directions. These
easements are also considered a site constraint but the land take is considered within our estimate of
developable area. We understand that Integral Energy have advised that there is existing capacity for an element
of the SWGC, but Oran Park and surrounds will require a new Zone substation.
8.
Planning Controls and Future Potential
Information from zoning maps at Camden Council identifies that the subject property is zoned 1(a) Rural “A”
under Local Environmental Plan (LEP) No. 48. The zoning provides for a minimum subdivision size of 40
hectares and promotes the conservation of agricultural uses together with compatible forms of development with
council approval.
There currently are no Development Applications relating to the subject property before Council for assessment.
The subject property is also recorded under LEP 48 as having local heritage significance and, we understand, is
currently being considered for inclusion on the State Heritage Register.
2
80
A future Local Environmental Study (LES) to underpin the future re-zoning of the land will require a Conservation
Management Plan to define and recommend a “heritage curtilage” for the consideration of the relevant authorities.
For the purposes of our valuation we have assumed that this will be provided via the current riparian corridor that
allows vistas from Camden Valley Way, and the future road entry corridor from Cobbitty Road.
The subject property is strategically located within the SWGC and the instructing party has made two (2) detailed
submissions to the Department of Planning to have the south Catherine Field precinct (that includes the subject
property) included in a “Precinct Acceleration Protocol” that is currently being considered by Government.
The Protocol is being assessed in two (2) stages and if successful, the subject property will be included with the
Turner Road and Oran Park precincts for priority re-zoning and land release. At this point in time the first stage of
the Protocol is yet to be determined by Government.
We concur with planning studies provided by the instructing party that identify that it appears practical and
reasonable for government to include south Catherine Field in the Protocol given the infrastructure delivery and
community benefits achievable by the location of the subject property being in-between the Turner Road and
Oran Park precincts.
For our valuation we have assumed that the subject property is formally included in the Protocol and that, upon
structure planning and the LES being complete, the land is approved for re-zoning and redevelopment in June
2009, which is considered reasonable as at the date of valuation.
However we caution that, whilst the highest and best use of the subject property is for future residential
redevelopment purposes, the exact development potential of the subject property and its timing for release
remains unclear as at the date of valuation given the early stage of the overall development process.
9.
Current Improvements
Oran Park House is a large imposing residence that appears in good structural condition and is currently utilised
by the vendor as a weekend retreat. The residence features numerous bedrooms and living areas with a good
standard of cosmetics, appliances and amenities.
In addition to the heritage house the subject property contains within the anticipated future heritage curtilage two
(2) caretakers residences, a coach house, a silo, water tanks, an in-ground pool, and a number of
machinery/storage sheds and garages (of varying vintage and condition).
We note from heritage studies perused that the heritage significance of the property appears to lie in the
improvements, the driveway, the gardens, ancillary out buildings, silos, and the prior pastoral use of the property.
Oran Park House is accessed via a long tree lined unpaved drive from Cobbitty Road.
10. Proposed Development
The subject property given its location, topography, infrastructure access and proximity to adjoining precincts
identified for “fast tracking” appears well suited for urban development.
As the focus of the instructing party at this point in time has been directed at having the subject property included
on the Precinct Acceleration Protocol, for our valuation we have not had the benefit of detailed master planning to
fully identify the site constraints and opportunities and potential lot yield.
Using a Concept Site Master Plan developed for the site, and after detailed discussions with the instructing party,
we have adopted the following developable area and open space assumptions:
Component
Site Area
Future Residential
55.00 ha
Oran Park House and Heritage Zone
12.00 ha
Riparian Zone S94
40.19 ha
Total
107.19 ha
We have adopted a yield of twelve (12) allotments per hectare at 70% site efficiency, indicating a total lot yield
potential of approximately 650 dwellings, which is considered reasonable as at the date of valuation, however
may potentially change as the development process progresses.
3
81
We acknowledge that the preference of Government is for fifteen (15) allotments per hectare, however our
adoption of twelve (12) may be considered as being an average over the total site when product diversity ranging
2
2
from small courtyard lots (< 350m ) to larger executive lots (>1,000m ) is considered.
The Concept Master Plan follows:
11. Market Commentary and Sales Activity
The current malaise of the Sydney residential market, which started in early 2004, is well documented. The
underlying cause appears to be a combination of poor State economic sentiment, concern regarding continued
interest rate increases, the current high cost of land development in terms of state and local government levies, a
shortage of low-cost serviced allotments, and boom prices during 2001 to 2003 having created a “spiked” pricing
point (notwithstanding recent market softening) that is still difficult for aspiring market entrants but essential for
highly geared home owners to maintain.
The slow down in the “retail” and “builders” take-up of newly developed and subdivided housing lots, and the
softening of prices being achieved, has caused a number of major greenfield developers to defer development
activity and reduce stock inventories pending the return of better sentiment. This is widely anticipated in two (2)
to three (3) years time when the State economy is expected to have recovered and, with it, the return of a
sustainable level of capital growth and market activity.
The South West Sydney market has been particularly hard hit over the past three (3) years as the regional
employment rate, given the nature of the local demographic, is more susceptible to slow State economic activity
than other regions of Sydney.
The above notwithstanding, given the current weight of money in the domestic capital market requiring a home
and a reasonable return on investment, and the increasing risk tolerance and expertise levels of listed and
unlisted fund managers, we are aware of a number of institutions seeking to currently enter the greenfield
residential development market as a form of counter cyclical play.
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There are few large future residential land acquisition opportunities in the North West Sydney and South West
Sydney residential markets given the high number of smaller sized land holdings and fragmented ownership.
Large aggregated holdings are attractive in that they offer control, economies of scale and critical mass for
viability, particularly given the high cost of the state and local government development levies.
The subject property offers this advantage, in that with the exception of the Perich family holdings (Leppington
Pastoral Company), the Fairfax family holdings (Harrington Park), the NSW Leagues Club (Camden Valley Golf
Resort), McIntosh Brothers (Oran Park), Australand (Edmondson Park) and potentially St Gregorys College
(Turner Road), there are few aggregated holdings within the SWGC.
Accordingly, given this tightly held ownership scenario, we are aware of only one (1) recent major sale within the
SWGC of a large un-rezoned greenfield site for direct comparison to the subject property, as follows:
Raby House, 1025 Camden Valley Way, Catherine Field – a 75.6 hectare rural property containing a derelict
heritage house and, subject to re-zoning and master planning, a future residential footprint of 37.2 hectares plus
heritage curtilage and riparian zones. The property sold for $16,000,000 in December 2005 with analysis
indicating the future developable urban area having a value of $386,425 per hectare.
We have also relied on the following transactions and have made value judgements to derive a proxy value rate
on a per hectare basis.
Richardson & Springs Road, Spring Farm – a 43 hectare parcel of residential development land with
subdivision approval for 456 allotments. The property sold for $34,000,000 in July 2006 at a rate of $790,698 per
developable hectare.
150 Lodges Road, Elderslie – a 12.8 hectare parcel of residential development land with staged development
consent providing a total of 145 allotments. The property sold for $12,700,000 in December 2005 (exchange of
contracts) at a rate of $1,149,321 per developable hectare.
And as a guide to smaller land holdings within the SWGC:
176 Ingleburn Road, Leppington – a 2.8 hectare rural residential property located within the future Leppington
Town Centre precinct. We understand that the property sold for $1,500,000 in December 2006 (exchange of
contracts). After deducting the estimated value of improvements we estimate an unimproved rate of $487,589 per
hectare.
347 Catherine Field Road, Catherine Field - a 2.1 hectare vacant rural residential site just outside the village of
Catherine Field that may have a portion of flood prone riparian area at the rear boundary. The property sold in
January 2006 at a rate of $378,672 per hectare.
12. Valuation Methodology
As indicated in Section 5 our primary method of valuation has been direct comparison given that a detailed
master plan and development costings are not available (nor likely warranted) for the subject property at this point
in time.
After consideration of a number of transactions, including the above described, we have ascribed a value of
$21,450,000 or $390,000 per hectare for the potential developable area (55 hectares), added the estimated value
of Oran Park House and proposed curtilage (12 hectares) of $2,500,000 on a sub-divided basis and an amount of
$50,000 for the residual area of 40.19 hectares proposed for riparian zone. This produces a total adopted market
value of $24,000,000.
We have checked this approach with a feasibility analysis that, under the circumstances, has required the use of
a number of assumptions regarding (but not limited to) development commencement (June 2009), construction
costs and levies, debt and holding costs.
We have adopted a revenue scenario of eleven (11) production stages for a total of 650 allotments with average
gross sale prices inclusive of GST commencing at $260,000 per lot and ranging to $280,000 for the last stage
with an average sales rate over the project of eight (8) allotments per month. We have also assumed that Oran
Park House and its curtilage is divested for $2,500,000 mid way through the development period.
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A summary of our feasibility calculations follows:
Gross Realisation
less Selling Expenses
$177,300,000
($5,862,067)
Net Realisation
less GST on Sales
$171,437,933
($14,185,751)
Net Project Revenue
less Profit & Risk @
20.00%
Net Realisation after Profit & Risk
$157,252,182
($26,296,541)
$130,955,642
Deduct Development costs
Construction Costs
Professional Fees
$31,906,875
$1,943,563
Contributions & Charges
Holding Costs
$60,170,800
$312,537
Loan Establishment Fee
Miscellaneous Costs
Add Back GST Input
$260,046
$0
($3,610,343)
$90,983,478
$39,972,164
Deduct
Interest
$14,745,695
Acquisition Costs
$1,363,572
Residual Value
$23,862,897
Adopted Residual Value
$23,900,000
Please note that the above feasibility reflects our view of the market conditions existing at the date of valuation
and does not purport to predict the market conditions and the value at the actual completion of development
because of the time lag.
13. Sale Contract
The instructing party has provided to us an extract of the Sale Contract for the purchase of the subject property
prepared by Colin Biggers & Paisley and dated 12 July 2006.
The extract confirms the purchase price of $19,025,000 with a completion date of 6 December 2007. No onerous
terms and conditions are identified from the extract provided.
14. Valuation
We advise that our adopted open market value assessment “as is” as at 31 March 2007 is $24,000,000
(Twenty Four Million Dollars) GST Exclusive.
15. Material Assumptions
The material valuation assumptions are contained in our detailed valuation report, which will be available for
inspection at the offices of VCML during normal business hours.
16. Qualification & Warning
CICV has been engaged by VCML to provide a valuation of the property described in Section 2 of this Summary
Report.
VCML wish to include the Report in the PDS and have requested CICV to consent to the inclusion of this Report.
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CICV consents to the inclusion of this Report in the PDS subject to the condition that VCML include this
Qualification and Warning in the PDS and make the recipients of the PDS aware of the following:•
This Report has been prepared for VCML only and for the specific purposes outlined in the Introduction
to the Report and cannot be relied upon by third parties.
•
This Report is a summary of the valuation of the property described in Section 2 and has not been
prepared for the purpose of assessing properties as an investment opportunity.
•
CICV has not been involved in the preparation of the PDS nor has the Report had regard to the other
material contained in the PDS. The Report and its content does not take into account any matters
concerning the investment opportunity contained in the PDS.
•
CICV makes no representation or recommendation to a Recipient in relation to the valuation of the
property or the investment opportunity contained in the Report.
•
Recipients must seek their own advice in relation to the investment opportunity contained in the PDS.
CICV has prepared this Report on the basis of, and limited to, the financial and other information (including
market information and third party information) referred to in the Report and contained in the full valuation report.
We have assumed that the third party information is accurate, reliable and complete and confirm that we have not
tested the information in that respect.
17. Liability Disclaimer
In the case of advice provided in this letter and our report which is of a projected nature, we must emphasise that
specific assumptions have been made by us which appear realistic based upon current market perceptions. It
follows that any one of our associated assumptions set out in the text of this summary may be proved incorrect
during the course of time and no responsibility can be accepted by us in this event.
This report has been prepared subject to the conditions referred to in our Qualification & Warning. Neither CICV
nor any of its Directors makes any representation in relation to the PDS nor accepts responsibility for any
information or representation made in the PDS other than in respect of this report.
CICV has prepared this summary which appears in the PDS. CICV were involved only in the preparation of this
summary and the valuations referred to herein, and specifically disclaim any liability to any person in the event of
any omission from, or false or misleading statement included in the PDS, other than in respect of the valuation
and this summary. We confirm that this summary may be used in this Product Disclosure Statement.
The valuation is current as at the date of the valuation only. The value assessed herein may change significantly
and unexpectedly over a relatively short period as a result of general market movements or factors specific to the
particular property. We do not accept liability for losses arising from such subsequent changes in value. Without
limiting the generality of the above comment, we do not assume any responsibility or accept any liability where
these valuations are relied upon after the expiration of three months from the date of the valuation, or such earlier
date if you become aware of any factors that have any effect on the valuation.
CICV confirms that it does not have a pecuniary interest that would conflict with its valuation of the property.
CICV is not providing advice about a financial product, nor the suitability of the investment set out in the PDS.
Such an opinion can only be provided by a person who holds an Australian Financial Services Licence. CICV
does not, nor does the Valuer, hold an Australian Financial Services Licence and is not operating under such a
licence in providing its opinion as to the value of the properties detailed in this report.
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18. Valuer’s Experience and Interest
We advise that the respective Valuer, Mr Russell McKinnon, AAPI is authorised under the relevant New South
Wales laws to practice as a Valuer and has in excess of five (5) years continuous experience in the valuation of
property similar to the subject.
Further, we confirm that the nominated Valuer does not have a pecuniary interest that could conflict with the
proper valuation of the property, and we advise that this position will be maintained until the purpose for which this
valuation is being obtained is completed.
Yours sincerely
Colliers International Consultancy and Valuation Pty Limited
Will Doherty
Managing Director
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Level 11 AMP Place
10 Eagle Street
Brisbane Qld 4000
GPO Box 146
+61 (0) 7 3246 8888
+61 (0) 7 3229 5436 fax
31 March 2007
The Directors
Sydney NSW 2000
iangregory@qld.knightfrankval.com.au
Direct: 07 3246 8864
Dear Sir
Re: 255 Archerfield Road and 301 Orchard Road, Richlands,
Brisbane, Queensland
Reference is made to instructions issued by Valad Commercial Management Limited (VCML), for
and on behalf of Valad Opportunity Fund (VOF), dated 13 March 2007 requesting Knight Frank
Valuations Queensland to assess the “As Is” Market Value of 255 Archerfield Road and 301 Orchard
Road, Richlands, Brisbane, Queensland, as an englobo land holding based on current zoning.
The valuation is required for asset revaluation and first mortgage security purposes.
For the purpose of inclusion in the Product Disclosure Statement, we provide a summary of the
valuation report outlining the key features which have been considered in arriving at our opinion of
Market Value. For further information we refer the reader to the contents of the comprehensive
valuation report, a copy of which is held by VCML.
Basis of Valuation
For the purposes of this assessment, Market Value is defined as:
“The estimated amount for which an asset should exchange on the date of valuation between
a willing buyer and a willing seller in an arm’s length transaction after proper marketing,
wherein the parties had each acted knowledgeably, prudently and without compulsion”.
In respect of our instructions, “‘Market Value’ is to be defined as that price which the property could
be expected to realise if offered for sale under normal commercial circumstances, in the prevailing
market conditions and with the expectation of a result within 6 months of the date from which the
property is offered for sale”.
Summary of Value
We have assessed the Market Value of the freehold interest in the properties as at 31 March 2007, to
be the sum of $11,400,000 exclusive of GST, subject to the qualifications and assumptions contained
within our formal report relating to various property details including, but not limited to the following:
x Title searches;
x Boundary surveys; and
x Development and Planning details.
Valuations Services (Qld) Pty Ltd ABN: 35 084 750 612, trading under licence as Knight Frank Valuations Queensland, is independently
P:\#FILES\F10715800\10715814\PDS Letter 31-03-07.doc
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87
31 March 2007
The Directors
Sydney NSW 2000
Level 11 AMP Place
10 Eagle Street
Brisbane Qld 4000
GPO Box 146
+61 (0) 7 3246 8888
+61 (0) 7 3229 5436 fax
iangregory@qld.knightfrankval.com.au
Direct: 07 3246 8864
Dear Sir
Re: 255 Archerfield Road and 301 Orchard Road, Richlands,
Brisbane, Queensland
Reference is made to instructions issued by Valad Commercial Management Limited (VCML), for
and on behalf of Valad Opportunity Fund (VOF), dated 13 March 2007 requesting Knight Frank
Valuations Queensland to assess the “As Is” Market Value of 255 Archerfield Road and 301 Orchard
Road, Richlands, Brisbane, Queensland, as an englobo land holding based on current zoning.
The valuation is required for asset revaluation and first mortgage security purposes.
For the purpose of inclusion in the Product Disclosure Statement, we provide a summary of the
valuation report outlining the key features which have been considered in arriving at our opinion of
Market Value. For further information we refer the reader to the contents of the comprehensive
valuation report, a copy of which is held by VCML.
Basis of Valuation
For the purposes of this assessment, Market Value is defined as:
“The estimated amount for which an asset should exchange on the date of valuation between
a willing buyer and a willing seller in an arm’s length transaction after proper marketing,
wherein the parties had each acted knowledgeably, prudently and without compulsion”.
In respect of our instructions, “‘Market Value’ is to be defined as that price which the property could
be expected to realise if offered for sale under normal commercial circumstances, in the prevailing
market conditions and with the expectation of a result within 6 months of the date from which the
property is offered for sale”.
Summary of Value
We have assessed the Market Value of the freehold interest in the properties as at 31 March 2007, to
be the sum of $11,400,000 exclusive of GST, subject to the qualifications and assumptions contained
within our formal report relating to various property details including, but not limited to the following:
x Title searches;
x Boundary surveys; and
x Development and Planning details.
Valuations Services (Qld) Pty Ltd ABN: 35 084 750 612, trading under licence as Knight Frank Valuations Queensland, is independently
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31 March 2007
Description of Property
The property comprises two adjoining and contiguous parcels of land forming one large
redevelopment land holding. The property has a frontage to Orchard Road to the west and
Archerfield Road to the east.
A summary of the land parcels follows:
Lot 1 on RP 62743 – 255 Archerfield Road - Site Area: 41,000m²
Located within the north-eastern corner of the site fronting Archerfield Road is a modest brick veneer
cottage together with assorted outbuilding structures which are of average to fair condition.
The site has been generally cleared with selected natural trees remaining.
We noted during our inspection that the property appears to have been utilised for market gardening
activities.
Lot 2 on RP 62743 – 301 Orchard Road - Site Area: 26,000m²
Located towards the central portion of the parcel fronting Orchard Road is an old timber and tin
cottage in fair condition with a number of dilapidated outbuildings.
This parcel has been partly cleared with the balance of the site comprising natural vegetation and
regrowth.
The parcels are situated approximately 20 road kilometres south-west of the Brisbane CBD.
Surrounding development to the east includes modest residential redevelopment whilst to the west
and north includes recently completed, purpose-built industrial complexes used mainly for
warehousing and distribution uses together with pockets of vacant land parcels. Immediately
adjoining the property to the south is a disused drive-in theatre.
All the usual city services including reticulated water, electricity, sewerage and telephone are
available to the property.
Market Overview
The commercial “vacant land” market throughout greater Brisbane has experienced unprecedented
growth in values over the last 2 years, with demand predominantly driven by “owner occupiers” within
the industrial market (due to the low cost of debt relative to current rental rates) and by developers
seeking larger tracts of land for subdivision and subsequent sale. With strong demand and limited
supply of “ready to build serviced land”, available properties have attracted a premium when offered
for sale with land previously deemed “secondary” having received renewed attention.
Many market observers have argued that the key driver of spiralling land values is scarcity of land
and that the rapid increases in value are potentially unsustainable, particularly given that nonresidential sector rentals have not kept pace with land values nor increased construction costs.
These factors have caused further erosion in yields and a continued compression of development
margins. The land value and construction cost/rent imbalance may see a correction. However at
this time there is no anecdotal evidence suggesting a near term market correction and
commercial/industrial facilities continue to be developed at a higher rate suggesting developers are
achieving adequate returns, despite escalating land values and construction costs.
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31 March 2007
Market Overview (cont)
The inequity between rents and land values is mainly the problem for new entrants buying in at
current high rates. Those developers who were able to identify the demand shift early and
subsequently land banked within the growth corridors, are generally the ones still making satisfactory
returns.
In summary, given that demand has occurred at the heart of the pricing shift, it is considered that the
following is likely to occur:
x With demand likely to remain strong, rentals will be re-rated upwards to justify the next round of
developments;
x Investment yields would fall further in anticipation of an uplift in underlying capital values; and
x New construction materials and methods will be explored in an effort to reduce, or if not contain,
constructions costs.
Whether there will be a continuation of the upwards spiral in land values on the back of continuing
strong demand occurring within the currently buoyant property cycle, is very much open to
speculation. To date, we have not identified any anecdotal evidence suggesting a slowing in current
demand levels for serviced land, or any adverse impact upon corresponding land purchase prices.
T
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Valuation Rationale
ND
A
L
Hthe Market Value of the property comprising two adjoining and
We have been instructed to assess
contiguous lots described as
RLotIC1 on RP 62743 (255 Archerfield Road) and Lot 2 on RP 26743 (301
Orchard Road) as an amalgamated site with two street frontages on an “As Is” basis, but prior to
payment of infrastructure levies in accordance with the Richlands Infrastructure Charges Plan.
The Brisbane City Council implemented the Infrastructure Charges Plan (ICP’s) during its drafting of
the Brisbane City Plan 2000 to comply with the requirements of the Integrated Planning Act 1997
(IPA).
In respect of the redevelopment potential of the site, we advise the amalgamated site is within a
“Future Industry– FI” area. This area consists mostly of unserviced land considered generally
suitable for industrial use and in this regard we understand Lot 2 has obtained preliminary approval
for a Material Change of Use that overrides the planning scheme to permit “General Industry” uses of
the land.
In undertaking our assessment having regard to our instructions in relation to the “As Is” “Future
Industry” classification, we have had regard to comments in relation to “rezoning”, as contained in the
Town Planning Investigation Report prepared by PMM Brisbane Pty Ltd for the Valad Property
Group.
This report has been prepared to address the potential subdivision and development options for the
subject properties referred to as 255 Archerfield and 301 Orchard Road, Richlands, as well as an
adjoining parcel referred to as 295 Archerfield Road.
The report advises that under the current Queensland planning provisions “a rezoning” of land is not
possible. Rather, development applications are required to seek approval for a “use” of the land
rather than a “zone” for the land. That is, for example, under the current plan provisions, owners are
required to seek approval for “a warehouse” as opposed to a “General Industry” classified
designation.
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31 March 2007
Valuation Rationale (cont)
In this regard, the report indicates that a recent Town Planning Decision Notice over Lot 2 on RP
62743 (301 Orchard Road, Richlands) has been recently obtained. This decision incorporates the
following components:
1.
2.
Preliminary approval for Material Change of Use that overrides the planning scheme to permit
“General Industry” uses of the land; and
Development Permit for reconfiguring a lot (i.e. subdivision) to create 7 lots and new road (Lots
ranging in size from 2,630m² to 5,285m²).
The report also indicates that a structure plan was approved in conjunction with this application that
nominates a future road through Lot 1 on RP 62743 (255 Archerfield Road) and a possible future
connection into the eastern side of Lot 3 on RP 62743.
The decision gives the approved allotments, once created, the right to be assessed under the
provisions of the “General Industry Area”, thereby making subsequent Material Change of Use
applications comparatively simpler and of less risk then they would be in a “Future Industry Area”
where the applications will be Impact Assessable. The structure plan also considers the future
development of Lot 1, therefore any application over Lot 1 would have already had a structure plan
considered for the site by Council, therefore saving time and costs.
T
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REP
S
D
N
A
We are of the opinion that the preliminary
approval for a Material Change of Use in respect of Lot 2
L
CinHrelation to the adjoining Lot 1, being the balance of the subject
provides a degree of comfort
I
R
amalgamated development site, in respect of achieving Material Change of Use to permit “General
Industry” uses over the balance of the amalgamated site area.
The report also indicates the remaining lot, being Lot 1 on RP 62743, can be developed as a single
use site requiring development application to be lodged to Council seeking approval for “Light
Industry” uses towards the Archerfield Road frontage, acting as a buffer to the existing and future
residential uses. Furthermore, the existing parcel may be subdivided as Community Title through the
creation of allotments by building format plan. Subdivisions such as these do not require a
subdivision approval from Council, however, it must be in accordance with a previously approved
Material Change of Use approval granted over the land.
The report also indicates the position in respect of reconfiguring the existing lots which would need to
be undertaken in accordance with the minimum lot sizes and would require the ultimate development
of the resulting parcels to be consistent with the “Light” and “General Industry Area” provisions to
ensure the “Light Industry” creates a buffer between the Residential Uses to the east and the
“General Industry” uses to the west. Road access will be required to be established from Orchard
Road in a similar fashion to that created for Lot 2 on RP 62743 as approved by Council decision or
alternatively connected to the ultimate design for Lot 1 on RP 62743 with road access ultimately
achieved through Lot 2. This however, will be subject to the assessment of the structure plan
prepared as part of the subdivision application for Lot 1 as it is a “Future Industry Area” and that the
development of Lot 2 proceeds as approved. The structure plan for Lot 1 will also be required to be
prepared in accordance with the structure plan approval for Lot 2 and will necessitate Lot 1 providing
a buffer to Lot 2 with “Light Industry Uses”.
In either option detailed above, a Material Change of Use application will be required to establish the
resulting use on each allotment whether they are the current lots or those resulting from a subdivision
application.
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31 March 2007
Valuation Rationale (cont)
However, as mentioned previously, the fact that Council was prepared in a Decision Notice over Lot
2 on RP 62743 to provide preliminary approval for Material Change of Use that overrides the
planning scheme to permit “General Industry” uses and a development permit for reconfiguring the
lot to permit subdivision and create smaller allotments, provides a certain level of comfort in relation
to the adjoining remaining portion of the amalgamated site, being Lot 1, including approval from
Council in respect of the removal of all or parts of the protected vegetation on-site, as did occur as
part of the approval for Lot 2.
The PMM Brisbane Pty Ltd report concludes that the ultimate use of the sites for either large or small
lot industrial uses will be supported by Council provided the relevant engineering, traffic,
environmental and design requirements are met for the sites.
We are of the opinion that the Decision Notice over Lot 2 on RP 62743 provides a certain level of
comfort in relation to obtaining Council support over the remaining component of the site
amalgamation, being Lot 1 on RP 62743, identified as 255 Archerfield Road, Richlands.
The above information has been extracted from the aforementioned planning report document
prepared for Valad Property Group (Valad) and provided to us by Valad to facilitate the preparation of
our valuation and we have assumed the information contained within the report is correct.
We make no warranty, however, as to the accuracy of the information and in the event the
information contained within the planning reports as provided to us proves to be incomplete or has
varied, we reserve the right to review and, if necessary, amend our valuation accordingly.
Valuation Methodology
“Future Industry” “As Is” Assessment
In arriving at our estimate of Market Value on the basis contained within our instructions, we have
relied upon the Direct Comparison Method of valuation whereupon the subject parcel has been
compared to sales of recent land transactions within the Brisbane metropolitan area, having regard to
the site’s location, current “Future Industry” classification, the topography of the site and the physical
attributes and detriments.
In respect of recent transactions involving the sale of vacant development sites, we have been
unable to identify any directly comparable sales evidence due to the fact that the subject property is
within a “Future Industry Area” and has a falling cross slope contour.
Therefore, we have considered a broad overview of recent and historic sales of vacant development
sites and in this regard our research indicates that properties have been sold in the range of $134/m²
up to $256/m² of site area, with sales of sites with “Future Industry” and “General Industry”
classifications within the Wacol–Richlands area being subject to ICP’s, but without development
approvals and elements of low contour land falling within the range of $145/m² up to $240/m² of site
area for parcels with site areas ranging from 2.2 hectares up to 9.26 hectares.
Based on the limited evidence of a directly comparable nature, the preliminary approval for a Material
Change of Use to permit “General Industry” uses of Lot 2, adopting a degree of professional
judgement, we are of the opinion that the amalgamated site, having regard to our earlier comments
in relation to the land holding, would have a value in the range of $165 to $175/m² of site area on an
“As Is” basis. On this basis, the property is considered to have a Market Value in the range of
$11,055,000 to $11,725,000 and for reporting purposes, we have adopted a mid point position of
$11,390,000 and for Market Value estimation purposes we have adopted a rounded Market Value of
$11,400,000, exclusive of GST.
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31 March 2007
Valuation Reconciliation
We have been advised that the amalgamated property is subject to two separate Contracts of Sale
with Lot 1 on RP 62743 (255 Archerfield Road) having a purchase price of $4,150,000 ($101/m²)and
Lot 2 on RP 62743 (301 Orchard Road) having a purchase price of $4,680,000 ($180/m²) with both
amounts being exclusive of GST. The combined purchase price equates to $8,830,000 ($131.79/m²)
exclusive of GST. The draft Contracts of Sale as provided to us are annexed to draft Put and Call
Option Deeds, copies of which have been supplied to us.
We comment that the respective purchase prices in our opinion reflects the stand alone status of the
individual parcels held in different ownership and this is critical in that the development potential of
the lots as separate entities is less than the development potential as a combined amalgamated site
in the one ownership with two street frontages, which provides significant increased development
opportunities.
This is particularly so in respect of 255 Archerfield Road which is located opposite a residential area
and any development on the site will require setbacks and buffer zones for the reduction of noise
which has a significant impact on the development potential of the site as a stand alone entity.
Furthermore, we are of the view that there are significant marriage value synergies in relation to an
amalgamated site compared with two stand alone allotments which potentially have lesser
development potential compared with the overall amalgamated land scenario.
Also we note from the Town Planning Investigation Report that road access may well need to be
established from Orchard Road and in this regard we note that the schematic plan of subdivision of
the site indicates road access from Orchard Road with a 30 metres building setback buffer provided
to the Archerfield Road frontage, but no on-site access.
We are of the view that the site in amalgamation has significant superior development potential with
the two street frontages, compared with the development potential that could be achieved with two
stand alone allotments with single road frontage.
On this basis, whilst the combined purchase price of the individual lots equates to approximately
$132/m², in our opinion the amalgamated site offers superior development potential and the market
would have cognisance of this. As an amalgamated site we are of the view that the property has a
value of $170/m², which suggests a marriage value premium in the order of 30% above the combined
individual purchase prices.
Having regard to the current buoyant industrial land market and the lack of opportunity in being able
to acquire adjoining land parcels to create a larger development opportunity, we are of the opinion
that the aforementioned marriage value premium is reasonable in the current market and on that
basis we have adopted a value of $170/m² for the “As Is” amalgamated land holding site area which
reflects the two street frontages affording superior development potential.
On this basis, in our opinion, the “As Is” Market Value of the property based on available evidence
and subject to the qualifications and assumptions contained within the body of our formal valuation
report document as at 31 March 2007, as an englobo land holding based on current zoning,
exclusive of GST is the sum of:
$11,400,000
(Eleven Million Four Hundred Thousand Dollars)
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31 March 2007
Liability Disclaimer
Knight Frank Valuations Queensland has prepared this letter based upon information available as at
the date of valuation.
Knight Frank Valuations Queensland has prepared this letter of summary for inclusion in the Product
Disclosure Statement but has not been involved in the preparation of any other part of the document.
Knight Frank Valuations Queensland has not been required to approve or express any opinion about
any part of the Product Disclosure Statement other than this letter of valuation summary.
Knight Frank Valuations Queensland, its directors, executive officers and employees therefore
cannot, and do not, make any warranty or representation as to the accuracy or completeness of any
information or statement contained in any part of the Product Disclosure Statement, other than those
expressly made or given in this letter of summary. Knight Frank Valuations Queensland specifically
disclaims liability to any person in the event of any alleged false or misleading statement in, or
material omission from, any part of the Product Disclosure Statement other than in respect of the
material prepared by Knight Frank Valuations Queensland.
Valuers’ Interest
The appointed Valuers from Knight Frank Valuations Queensland do not have any pecuniary interest
that would conflict with the proper valuation of the properties and the valuation has been made
independently of Valad Commercial Management Limited (VCML) and Valad Opportunity Fund
(VOF) and/or its officers.
The Valuers performing this valuation have in excess of 5 years continuous experience in the
valuation of property of a similar type and are authorised to practise as Valuers in the State of
Queensland.
The Valuers have prepared this valuation in accordance with all relevant principles applicable to a
valuation of this type of property having regard to all relevant and surrounding circumstances and
including any particular requirements of VCML and/or VOF.
In providing this valuation report, Knight Frank Valuations Queensland is not providing financial
product advice. Furthermore, Valuations Services (Qld) Pty Ltd trading as Knight Frank Valuations
Queensland is not operating under an Australian Financial Services Licence under the Corporations
Act 2001 and is not required to hold a licence in accordance with Regulation 7.6.01(1)(u) of the Act.
In providing this report, the benefits received by Knight Frank Valuations Queensland and the
persons associated with it pursuant to sub-Section 947B(2)(d) under Corporations Act 2001 are as
follows:
Property Valuation Fee:
Reimbursement of Search Fees and other costs:
Preparation of summary letter for inclusion in the Product Disclosure Statement:
$3,500 plus GST
$ 200 plus GST
$5,000 plus GST
Total:
$8,700 plus GST
No commissions, further payments or additional benefits will be paid to Knight Frank Valuations
Queensland which are dependent on the success or otherwise of any capital raising or other matters
relating to this offer.
94
Page 8
31 March 2007
Valuers’ Interest (cont)
Knight Frank Valuations Queensland is not aware of any interests, associations or relationships
between Knight Frank Valuations Queensland or its associates with Valad Commercial Management
Limited or Valad Opportunity Fund or its associates that may reasonably be expected to be or have
been capable of influencing Knight Frank Valuations Queensland in the preparation of our valuation
or providing this report.
Yours faithfully
Knight Frank Valuations Queensland
IAN GREGORY
Director
95
BDO Kendalls
BDO Kendalls Corporate
Finance (NSW) Pty Ltd
Level 19, 2 Market St
Sydney NSW 2000
GPO Box 2551 Sydney NSW 2001
Phone 61 2 9286 5555
Fax 61 2 9286 5599
cf.sydney@bdo.com.au
www.bdo.com.au
ABN 91 003 946 030
AFS Licence No. 244345
20 April 2007
The Directors
SYDNEY NSW 2000
Dear Sirs,
VALUATION OF PREFERRED EQUITY INTERESTS IN THE NOOSA NORTH SHORE – SOUTH
PROJECT
1
INTRODUCTION
In accordance with our engagement letter dated 29 March 2007 BDO Kendalls Corporate Finance
(NSW) Pty Limited (“BDO Corporate Finance”) have undertaken an independent valuation of the
preferred equity interests that Valad Opportunity Fund No. 11 (“VOF”) may acquire in the Noosa
North Shore – South (“NNS – S”) project (“the Project”) currently held by Valad Funds
Management Limited (“VFML”).
2
PURPOSE AND SCOPE OF REPORT
VOF is in the process of converting from an Australian Securities Exchange (“ASX”) listed fund to
an unlisted fund. Unitholders have the option of either redeeming their VOF units or remaining in
the unlisted fund.
A public offer of VOF units is being undertaken to raise capital to:
i.
fund the redemptions of those existing unitholders who choose to exit VOF; and
ii.
acquire the preferred equity interests in the NNS-S property development project currently
held by VFML.
We have prepared this valuation report (“Report”) for the purpose of valuing the preferred equity
interests in NNS-S that VOF will be acquiring.
This summary Report is to be included in the Product Disclosure Statement (“PDS”) for the public
offer of VOF units.
3
VALUATION SUMMARY
The results of our valuation of VFML’s preferred equity interests in NNS-S as at 31 March 2007 are
summarised in the table below.
VFML’s Interest
Total Preferred Equity interests in NNS-S held by VFML
Low
$’000
11,286
High
$’000
11,874
BDO Kendalls is a national association
of separate partnerships and entities.
Liability limited by a scheme approved
under Professional Standards Legislation.
96
4
OUTLINE OF PREFERRED EQUITY INTEREST
VFML has invested $10.1 million in the form of preferred equity as at 31 March 2007. The preferred
equity has two components as follows:
4.1
4.2
Coupon Component
x
VFML receives a coupon on the face value of the preferred equity invested.
x
The preferred equity has a coupon rate of 11.5% p.a. payable monthly. Unpaid interest is
capitalised. Interest is payable on the face value of the preferred equity (Interest is not payable
on any unpaid coupons).
x
VFML’s interest and face value of the preferred equity will be paid ahead of Petrac Property
Group’s (“Petrac”)’s interest and face value.
Profit Share Component
x
Any cash remaining in the Project after the repayment of all preferred equity (principal and
interest) will be allocated to the investors as follows.
Investor
VFML
Petrac
5
Share of Profits
VFML’s IRR below 25%
40%
VFML’s IRR above 25%
25%
60%
75%
VALUATION METHODOLOGIES
We have selected the Discounted Cash Flow (“DCF”) methodology to value VFML preferred equity
interests in NNS-S that VOF are acquiring.
The DCF methodology requires consideration of forecast cash flows and a discount rate.
As different risks are attached to the coupon and profit share components of the Preferred Equity
we have valued these elements separately.
6
TARGET CASH FLOWS
Valad has provided us with Project operating and financing cash flow targets for the period ending
30 November 2009. These targets have been used as the basis of our valuations.
As the detailed cash flow projections are commercially sensitive they have not been set out in our
report. The directors of Valad are responsible for the preparation of the targets and the
assumptions upon which they are based.
Whilst we have not conducted a detailed review of the targets or the underlying assumptions, we
note that nothing has come to our attention that would lead us to believe that the assumptions
underlying the targets are unreasonable.
There is a considerable degree of subjective judgement involved in the preparation of the target
financial information. Actual results may vary materially from those targets and the variation may
be materially positive or negative. Accordingly, investors should have regard to the Section on risk
factors set out in the PDS.
BDO CORPORATE FINANCE
2
97
7
VALUATION OF VFML’S PREFERRED EQUITY
7.1
Valuation Of VFML’s Coupon Component Of Preferred Equity
The target cash flows for VFML’s coupon component of preferred equity for the period 1 April 2007
to 30 November 2009 have been sourced from the targets discussed in Section 6.
We have estimated the discount rate for the coupon component of VFML’s preferred equity
between 12% and 14% having considered the following:
x
The relative riskiness of the coupon component of VFML’s preferred equity instrument to:
i.
ii.
iii.
iv.
7.2
the Project’s senior debt;
the Project’s mezzanine debt instrument;
the preferred equity instrument issued to Petrac;
the profit share component of the preferred equity instrument;
x
The coupon component of VFML’s preferred equity is target to be repaid 5 months before the
target end of the Project;
x
The actual coupon rate attaching to the preferred equity instrument (11.5%); and
x
The cost of equity determined for the profit share component of the preferred equity
instrument in Section 7.2.
Valuation Of VFML’s Profit Share Component Of Preferred Equity
The target cash flows for VFML’s profit share component of preferred equity for the period 1 April
2007 to 30 November 2009 have been sourced from the targets discussed in Section 6.
We have used the cost of equity as the most appropriate discount rate to apply to the profit share
component of the preferred equity instrument. We have calculated the cost of equity by applying
the Capital Asset Pricing Model (“CAPM”).
Having considered comparable listed entities, the level of gearing, and the pre-tax nature of the
cash flows, we have determined that an appropriate discount rate is between 30% and 35%.
8
SOURCES OF INFORMATION
In preparing this report, we have referred to the following:
x
NNS-S Project Target Operating and Financing Cash Flows for the period ending November
2009;
x
Management accounts for the period to 28 February 2007;
x
Heads of Terms – Transfer of Preferred Equity Position to VOF, March 2006;
x
Mezzanine Investment Proposal, July 2006;
x
Facility Agreement – Preferred Equity;
x
Investment Proposal – Preferred Equity, October 2005
x
Discussions with VOF management;
x
ASX data;
x
Bloomberg; and
x
Information available in the public domain.
98
3
9
CONSENTS AND DISCLAIMERS
This Report has been prepared for the purpose of valuing the preferred equity interests in NNS-S
that VOF may acquire from VFML, and will be included in a PDS for the public offer of VOF units.
The Report should not be used for any other purpose without the prior written consent of BDO
Corporate Finance.
In accordance with normal professional practice, neither BDO Corporate Finance nor any member
or employee of BDO Corporate Finance undertakes responsibility in any way whatsoever to any
person other than Valad in respect of this Report. Neither the whole of this Report nor any part
thereof nor any reference thereto may be published in any document, statement or circular, or in
any communication with third parties without BDO Corporate Finance’s prior written approval of
the form and context in which it will appear.
BDO Corporate Finance has not carried out any work in the nature of an audit in respect of the
information contained in the documents noted in Section 8 above, nor have we attempted to
independently confirm the information therein and accordingly express no opinion as to its truth
or accuracy. Furthermore, whilst we have no reason to doubt that the information provided to us is
reliable, complete and not misleading and that no material facts have been withheld, we do not
warrant that our enquiries have revealed all matters that a more detailed extensive investigation
may have disclosed.
To the extent that our conclusions are based on targets, we express no opinion on the
achievability of those targets. Neither BDO Corporate Finance nor any member or employee of
BDO Corporate Finance undertakes responsibility in any way whatsoever to any person in respect
of errors in this report arising from incorrect information provided by Management or in respect of
the failure of targets to be achieved.
Yours faithfully
BDO KENDALLS CORPORATE FINANCE (NSW) PTY LIMITED
Sebastian Stevens
Director
4
99
9.2 Investigating Accountant’s Report
Deloitte Corporate Finance Pty Limited
A.B.N. 19 003 833 127
AFSL No. 241457
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250
Sydney NSW 1220 Australia
Note: This report consists of both a
Financial Services Guide and a
Review of Pro-forma Financial
Information
Part 1 - Financial Services
Guide
3 May 2007
What is a Financial Services Guide?
This Financial Services Guide (FSG) is an important
document whose purpose is to assist you in deciding
whether to use any of the general financial product advice
provided by Deloitte Corporate Finance Pty Limited
(ABN 19 003 833 127). The use of “we”, “us” or “our” is
a reference to Deloitte Corporate Finance Pty Limited as
the holder of Australian Financial Services Licence
(AFSL) No. 241457. The contents of this FSG include:
who we are and how we can be contacted
what services we are authorised to provide under
our AFSL
how we (and any other relevant parties) are
remunerated in relation to any general financial
product advice we may provide
details of any potential conflicts of interest
details of our internal and external dispute
resolution systems and how you can access them.
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
member firms has any liability for each other's acts or
omissions. Each of the member firms is a separate and
independent legal entity operating under the names
"Deloitte," "Deloitte & Touche," "Deloitte Touche
Tohmatsu," or other related names.
The financial product advice in our report is provided by
Deloitte Corporate Finance Pty Limited and not by the
Australian partnership of Deloitte Touche Tohmatsu, its
related entities, or the Deloitte Touche Tohmatsu Verein.
We do not have any formal associations or relationships
with any entities that are issuers of financial products.
However, you should note that we and the Australian
partnership of Deloitte Touche Tohmatsu (and its related
bodies corporate) may from time to time provide
professional services to financial product issuers in the
ordinary course of business.
What financial services are we
licensed to provide?
The AFSL we hold authorises us to provide the following
financial services to both retail and wholesale clients:
Information about us
We have been engaged by the Directors of Valad
Commercial Management as Responsible Entity for
Valad Opportunity Fund No. 11 (“VCML”) to give
general financial product advice in the form of a report to
be provided to you in connection with the offering of
units in the Valad Opportunity Fund No. 11. You are not
the party or parties who engaged us to prepare this report.
We are not acting for any person other than the party or
parties who engaged us. We are required to give you an
FSG by law because our report is being provided to you.
You may contact us using the details located above.
Deloitte Corporate Finance Pty Limited is ultimately
owned by the Australian partnership of Deloitte Touche
Tohmatsu. The Australian partnership of Deloitte Touche
Tohmatsu and its related entities provide services
primarily in the areas of audit, tax, consulting, and
financial advisory services. Our directors may be partners
in the Australian partnership of Deloitte Touche
Tohmatsu.
The Australian partnership of Deloitte Touche Tohmatsu
is a member firm of the Deloitte Touche Tohmatsu
Verein. As the Deloitte Touche Tohmatsu Verein is a
Swiss Verein (association), neither it nor any of its
100
to provide general financial product advice in
respect of:
−
−
−
debentures, stocks or bonds to be issued or
proposed to be issued by a government
interests in managed investment schemes
including investor directed portfolio services
securities.
to deal in a financial product by arranging for
another person to apply for, acquire, vary or
dispose of financial products in respect of:
−
−
−
debentures, stocks or bonds issued or to be
issued by a government
interests in managed investment schemes
including investor directed portfolio services
securities.
Information about the general
financial product advice we provide
The financial product advice provided in our report is
known as “general advice” because it does not take into
account your personal objectives, financial situation or
needs. You should consider whether the general advice
contained in our report is appropriate for you, having
regard to your own personal objectives, financial
situation or needs.
If our advice is being provided to you in connection with
the acquisition or potential acquisition of a financial
product issued another party, we recommend you obtain
and read carefully the relevant offer document provided
by the issuer of the financial product. The purpose of the
offer document is to help you make an informed decision
about the acquisition of a financial product. The contents
of the offer document will include details such as the
risks, benefits and costs of acquiring the particular
financial product.
How are we and our employees
remunerated?
Our fees are
however they
another basis.
out-of-pocket
services.
usually determined on an hourly basis;
may be a fixed amount or derived using
We may also seek reimbursement of any
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Fee arrangements are agreed with the party or parties
who actually engage us, and we confirm our
remuneration in a written letter of engagement to the
party or parties who actually engage us.
Neither Deloitte Corporate Finance Pty Limited nor its
directors and officers, nor any related bodies corporate or
associates and their directors and officers, receives any
commissions or other benefits, except for the fees for
services rendered to the party or parties who actually
engage us. Our fee is $70,000 and will also be disclosed
in the relevant PDS or offer document prepared by the
issuer of the financial product.
All of our employees receive a salary. Our employees are
eligible for annual salary increases and bonuses based on
overall performance but do not receive any commissions
or other benefits arising directly from services provided
to you. The remuneration paid to our directors reflects
their individual contribution to the company and covers
all aspects of performance. Our directors do not receive
any commissions or other benefits in connection with our
advice.
We do not pay commissions or provide other benefits to
other parties for referring prospective clients to us.
Responsibility
The liability of Deloitte Corporate Finance Pty Limited is
limited to the contents of this FSG and our report referred
to in this FSG.
What should you do if you have a
complaint?
If you have any concerns regarding our report, you may
wish to advise us. Our internal complaint handling
process is designed to respond to your concerns promptly
and equitably. Please address your complaint in writing
to:
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Practice Protection Group
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If you are not satisfied with the steps we have taken to
resolve your complaint, you may contact the Financial
Industry Complaints Service (“FICS”). FICS provides
free advice and assistance to consumers to help them
resolve complaints relating to members of the financial
services industry. Complaints may be submitted to FICS
at:
Financial Industry Complaints Service
PO Box 579
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Melbourne VIC 8007
Telephone: 1300 780 808
Fax: +61 3 9621 2291
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If your complaint relates to the professional conduct of a
person who is a Chartered Accountant, you may wish to
lodge a complaint in writing with the Institute of
Chartered Accountants in Australia (“ICAA”). The ICAA
is the professional body responsible for setting and
upholding the professional, ethical and technical
standards of Chartered Accountants and can be contacted
at:
The Institute of Chartered Accountants
GPO Box 3921
Sydney NSW 2001
Telephone: +61 2 9290 1344
Fax: +61 2 9262 1512
Specific contact details for lodging a compliant with the
ICAA can be obtained from their website at
http://www.icaa.org.au/about/index.cfm.
The Australian Securities and Investments Commission
(“ASIC”) regulates Australian companies, financial
markets,
financial
services
organisations
and
professionals who deal and advise in investments,
superannuation, insurance, deposit taking and credit.
Their website contains information on lodging
complaints about companies and individual persons and
sets out the types of complaints handled by ASIC. You
may contact ASIC as follows:
Info line: 1 300 300 630
Email: infoline@asic.gov.au
Internet: http://www.asic.gov.au/asic/asic.nsf
101
Deloitte Corporate Finance Pty Limited
A.B.N. 19 003 833 127
AFSL No. 241457
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250
Sydney NSW 1220 Australia
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
The Directors
As Responsible Entity for Valad Opportunity Fund No 11
Sydney NSW 2000
3 May 2007
Dear Directors
Investigating Accountants’ Report on Financial Information
Introduction
Deloitte Corporate Finance Pty Limited (“Deloitte”) has been engaged by the Directors of Valad Commercial
Management Limited (“VCML”) to prepare this Investigating Accountants’ Report (“Report”) for inclusion in
the Product Disclosure Statement (“PDS”) to be dated on or around 3 May 2007, and to be issued by VCML in
respect of the issue of new units in the Valad Opportunity Fund No 11 (“VOF” or the “Fund”).
Expressions defined in the PDS have the same meaning in this report unless otherwise provided.
Scope
Review of Financial Information
We have reviewed the Consolidated Balance Sheet of the Fund at 31 March 2007, the Pro-forma Consolidated
Balance Sheet of the Fund at Allotment and the Adjusted Pro-forma Consolidated Balance Sheet of the Fund at
Allotment as set out in Section 8.2 of the PDS (collectively the “Financial Information”).
The Pro-forma financial information is based on the Consolidated Balance Sheet of the Fund at 31 March 2007
and incorporates the pro-forma adjustments which the directors of VCML considered necessary to reflect the
pro-forma financial position of VOF at allotment as set out in Section 8.2 of the PDS, including the assumed
exercise of the call option in relation to Oran Park which is due to be exercised in December 2007. The Adjusted
Pro-forma Consolidated Balance Sheet at Allotment reflects the Pro-forma Consolidated Balance Sheet at
Allotment amended to reflect the estimated fair value of property inventory. The directors of VCML are
responsible for the preparation of the Financial Information, including determination of the pro-forma
adjustments.
Our review has been conducted in accordance with Australian Auditing Standard AUS 902 “Review of Financial
Reports”. We have made such enquiries and performed such procedures as we, in our professional judgement,
considered reasonable in the circumstances, including:
•
Analytical procedures on the Financial Information;
•
A review of work papers, accounting records and other documents;
•
A review of the pro-forma adjustments described in Section 8.2 of the PDS;
•
A comparison of consistency in application of the recognition and measurement principles in AIFRS
and other mandatory professional reporting requirements in Australia, and the accounting policies
adopted by VOF as disclosed in the VOF financial statements for the period ended 31 December 2006
and in Section 8.6 of the PDS; and
•
Enquiry of the directors and management of VCML.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of
102
These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance
provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an
audit opinion on the Financial Information.
Review Statement
Based on our review, which is not an audit, nothing has come to our attention which causes us to believe that the
Consolidated Balance Sheet of the Fund at 31 March 2007 as set out in Section 8.2 of the PDS is not presented
fairly in accordance with:
•
the recognition and measurement principles prescribed in AIFRS and other mandatory professional
reporting requirements in Australia: and
•
the key accounting policies adopted by VOF as disclosed in Section 8.6 of the PDS
Pro-forma Consolidated Balance Sheet of the Fund at Allotment as set out in Section 8.2 of the PDS is not
presented fairly in accordance with:
•
the pro-forma adjustments described in Section 8.2 of the PDS;
•
reporting requirements in Australia: and
•
the accounting policies adopted by VOF as disclosed in Section 8.6 of the PDS
Adjusted Pro-forma Consolidated Balance Sheet of the Fund at Allotment as set out in Section 8.2 of the PDS is
not presented fairly in accordance with:
•
the pro-forma adjustments described in Section 8.2 of the PDS;
•
reporting requirements in Australia except that property inventory has been reflected at fair value.
•
the accounting policies adopted by VOF as disclosed in Section 8.6 of the PDS except that property
inventory has been reflected at fair value.
Subsequent Events
Apart from the matters dealt with in this Report, and having regard for the scope of our Report, nothing has
come to our attention that would cause us to believe that matters, other than matters dealt with in this Report,
would require comment on, or adjustments to, the information contained in this Report, or would cause such
information to be misleading or deceptive.
Independence and Disclosure of Interest
Deloitte Corporate Finance Pty Limited does not have any interest in the outcome of this issue other than the
preparation of this Report and participation in due diligence procedures for which normal professional fees will
be received.
Consent
Deloitte Corporate Finance Pty Limited has consented to the inclusion of this Investigating Accountants’ Report
in the PDS in the form and context in which it is so included, but has not authorised the issue of the PDS.
Accordingly, Deloitte Corporate Finance Pty Limited makes no representation regarding, and takes no
responsibility for, any other documents or material in, or omissions from, the PDS.
Yours faithfully
DELOITTE CORPORATE FINANCE PTY LIMITED
Steve Woosnam
Director
103
9.3 Taxation Report
ABN 52 780 433 757
The Directors
Valad Commercial Management Ltd
as Responsible Entity for Valad Opportunity Fund No.11
SYDNEY NSW 2000
201 Sussex Street
GPO BOX 2650
SYDNEY NSW 1171
DX 77 Sydney
Australia
www.pwc.com/au
Telephone +61 2 8266 0000
Facsimile +61 2 8266 9999
Direct Phone 8266 5221
Direct Fax 8286 5221
3 May 2007
Dear Sirs
Valad Opportunity Fund No 11 (the Fund)
We have prepared this letter to provide a broad summary of the income tax considerations for
investors in the Fund for the purpose of inclusion in the Product Disclosure Statement of the Fund
to be dated 3 May 2007.
The information below is based on existing tax law and established interpretations as at the date of
this letter.
The taxation information provided below is intended as a brief guide only. The information only
applies to Australian resident individual investors who hold their Units on capital account, and may
not apply to Unitholders who are traders or are carrying on a business which includes deriving
gains from the disposal of Units.
The taxation of a unit trust such as the Fund can be complex and may change over time.
Accordingly, Unitholders are recommended to seek professional taxation advice in relation to their
own position.
The information contained in this letter does not constitute "financial product advice" within the
meaning of the Corporations Act 2001 (Cth) (Corporations Act). PricewaterhouseCoopers which is
providing this letter is not licensed to provide financial product advice under the Corporations Act.
To the extent that this letter contains any information about a "financial product" within the meaning
of the Corporations Act, taxation is only one of the matters that must be considered when making a
decision about the relevant financial product. This letter has been prepared for general circulation
and does not take into account the objectives, financial situation or needs of any recipient.
Accordingly, any recipient should, before acting on this material, consider taking independent
financial advice from a person who is licensed to provide financial product advice under the
Corporations Act.
Liability limited by a scheme approved under Professional Standards Legislation
104
Taxation of the Fund
Public trading trusts
Generally, the taxation treatment for the Fund will depend on whether the Fund is a public trading
trust during a particular income year. The consequences of being a public trading trust will be that
the Fund will be treated as a company for most tax purposes. The public trading trust test is a year
to year test.
In order to be treated as a public trading trust, the Fund must be both a public trust and a trading
trust at any time in an income year. The Fund’s Units have been listed on the Australian stock
exchange since inception and therefore it has been classified a public trust. The Fund will be a
trading trust if it carries on a trading business or controls an entity that carries on a trading business
at any time during an income year. Broadly, in the context of land, a trading business is any activity
other than investing in land for the primary purpose of deriving rental income.
Historically, the Fund has been undertaking trading activities and hence has been taxed as a public
trading trust. For the year ending 30 June 2007, we expect that the Fund will still be classified as a
public trading trust.
Forming a tax consolidated group
There are additional tax consequences for a public trading trust that chooses to be the head entity
of a tax consolidated group. A unit trust can only be the head entity of a tax consolidated group if it
is either a corporate unit trust or public trading trust in the income year that it elects to consolidate.
Given that the Fund should be a public trading trust for the year ending 30 June 2007 it is eligible to
be the head entity of a tax consolidated group from 1 July 2006.
You have advised us that it is intended that the Fund will make the election to be the head entity of
a tax consolidated group with effect from 1 July 2006. The consequences of the Fund being the
head entity of a tax consolidated group will be that from 1 July 2006 the Fund will be treated as a
company for all tax purposes for the remainder of its existence. This is the case even if the Fund
fails to satisfy the public trading trust test in any given income year.
Taxation of the Fund as a tax consolidated group
The effects of the Fund being the head entity of a tax consolidated group include the following:
•
The Fund is considered to be a separate taxable entity from its investors and is liable to
Australian income tax at the corporate rate (currently 30%) on the net income of the entire
tax consolidated group.
•
The Fund and its wholly owned subsidiaries will be treated as a single entity for all income
tax purposes. By way of example, if a subsidiary of the Fund incurs an overall tax loss in
an income tax year then that loss is deemed to have been made by the Fund.
(2)
105
•
The Fund receives franking credits for the amount of tax paid and these are used to frank
distributions to Unitholders just as company dividends may be franked.
Tax losses
Where a revenue loss or net capital loss is incurred by the Fund, the loss cannot be passed on to
Unitholders for tax purposes. Instead, revenue tax losses will be carried forward in the Fund and
offset against assessable income derived in future years. Net capital losses will be carried forward
in the Fund and offset against future capital gains.
Legislation exists which restricts the circumstances in which an entity may claim an allowable
deduction for prior and current year revenue and capital losses. Once consolidated, the Fund
would need to satisfy the company loss recoupment rules before any revenue or capital losses
incurred could be utilised. In particular the Fund would have to meet a greater than 50%
underlying ownership test or where its turnover is less than $100 million continue to carry on the
same business such that the detailed requirements of the tax law’s same business test were met.
Taxation of Australian resident investors
Taxation of distributions
Distributions received by Unitholders must be included in the Unitholder’s assessable income in the
year in which the payment is made. The distributions will be assessable to a Unitholder as if they
are dividends paid by a company. This applies except where the distribution is treated as a return
of capital (refer below).
To the extent that distributions paid to Unitholders are franked, the grossed up amount (ie the
distribution plus the attached franking credit) is included in the Unitholder’s assessable income.
The Unitholder is then allowed a franking offset equal to the franking credit.
Excess franking credits (ie excess of franking credit over tax payable) are refunded to individual
and superannuation fund Unitholders after lodgment of annual income tax returns.
To the extent that distributions are unfranked, Unitholders are assessed on the unfranked amount
received and there is no franking credit available.
There are a number of measures that may affect the ability of a Unitholder to use franking credits,
including the holding period rule. Broadly speaking, the holding period rule requires Unitholders to
hold their Units at risk for more than 45 days during the relevant period. Given that these rules can
be complex, investors should be aware of and seek specific advice on their own position.
Return of capital by the Fund
Amounts that are distributed to Unitholders may be treated as a return of capital and not a
dividend, but only to the extent that the amounts are debited against the share capital account of
the Fund. Such amounts will be treated as a reduction in the capital gains tax cost base of the
(3)
106
Unitholder’s Units. A capital gain will arise for the Unitholder to the extent that the return of capital
exceeds the cost base of the Units. The share capital account is defined in the tax law as being
amounts that are not attributable to profits of the Fund and we consider the Contributed Equity as
shown in the Fund accounts is equivalent to share capital.
Even if distributions are debited to the share capital account of the Fund, there are provisions in the
tax law which can still treat the amounts as dividends for income tax purposes. These rules only
apply where the Commissioner of Taxation determines there is a scheme to provide tax benefits to
Unitholders, but, for example, can be applied if there are profits (either realised or unrealised)
available for distribution and other circumstances indicate the distribution is in lieu of a dividend.
Taxation of capital gains
A disposal of Units in the Fund will have CGT implications. Broadly, Unitholders must include any
realised capital gain or loss in the calculation of their net capital gain. A net capital gain will be
included in a Unitholder’s assessable income for that year. A net capital loss may be offset against
other net capital gains or carried forward until the Unitholder has realised capital gains against
which the net capital loss can be offset.
The net capital gain to Unitholders is worked out as follows:
•
•
•
•
The capital gain or loss is the excess or shortfall of disposal proceeds over the cost base of
the Units.
If Units have been held for less than 12 months this is the amount of gain or loss included
in the net capital gain calculation.
If Units have been held for 12 months or more and there is a loss, similarly this loss is
included in the net capital gain calculation.
If Units have been held for 12 months or more and there is a gain, a discounting factor may
be available to certain Unitholders. The discounting factor for individuals and trusts is 50%,
whilst a discount factor of 33 1/3% applies to complying superannuation entities.
Exit Mechanism
Valad is providing an exit mechanism to those Unitholders who remain in the Fund three and a half
years post allotment of Units under this offer (refer to section 2.10 of this PDS). Under this exit
mechanism, the Fund will either redeem its Units, the Units will be transferred to Valad or the Fund
will be terminated.
A disposal of Units by Unitholders will occur for CGT purposes under each scenario. We note that
the exact nature of the transaction will ultimately determine the income tax consequences for
Unitholders.
(4)
107
Tax File Numbers and Australian Business Numbers
A Unitholder need not quote a Tax File Number ("TFN") when applying for Units. However, if a TFN
is not quoted, or no appropriate TFN exemption information is provided, tax is required to be
deducted from payments made at the highest marginal tax rate plus Medicare levy.
Unitholders that hold their Units as part of their business may quote their Australian Business
Number instead of their TFN.
The purchase and disposal of Units in the Fund by Unitholders is not subject to GST.
Yours sincerely
Brian Lawrence
Partner
Tax and Legal Services
(5)
108
> 10 MATERIAL
DOCUMENTS
AND ADDITIONAL
INFORMATION
> 10 MATERIAL DOCUMENTS
AND ADDITIONAL INFORMATION
10.1 Consents and Disclaimers
Directors’ Consent
The Directors have each consented to the issue of this PDS.
NAB’s Consent
National Australia Bank Limited has given, and has not
withdrawn, its consent for the references to NAB in its
capacity as Sole Arranger and Underwriter.
Trust Company Limited – Consent and Disclaimer
It is not the role of Trust Company Limited (“TCL”) to protect
the rights and interests of investors. TCL does not guarantee
the return of any investment, any tax deduction availability
or performance of any of the investments of the Fund.
TCL has given and not withdrawn its consent to be named
as custodian in this PDS. It has not been involved in the
preparation of any part of this PDS. It has not authorised or
caused the issue of, and expressly disclaims and takes no
responsibility for, any part of this PDS, except for reference
made to it in the form and context in which it appears.
Consents of Experts
PricewaterhouseCoopers have given and have not, before
the lodgement of this PDS with ASIC, withdrawn their written
consent to the inclusion in the PDS of the Taxation Report
included in Section 9.3 in the form and context in which it
is included and to be named in this PDS.
Deloitte Corporate Finance Pty Limited have given and have
not, before the lodgement of this PDS with ASIC, withdrawn
their written consent to the inclusion in the PDS of the
Investigating Accountant’s Report included in Section 9.2 in
the form and context in which it is included and to be named
in this PDS.
M3 Property has given and has not before the lodgement
of this PDS with ASIC, withdrawn its written consent to the
inclusion in this PDS of the summary of its valuation report in
relation to MIAC, Melbourne in the form and context in which
that summary is included in Section 9.1, and to be named in
this PDS.
110
Knight Frank has given and has not, before the lodgement
of this PDS with ASIC, withdrawn its written consent to the
inclusion in this PDS of its valuation report in relation to
Richlands, Brisbane in the form and context in which that
summary is included in Section 9.1, and to be named in
this PDS.
Colliers has given and has not, before the lodgement of this
PDS with ASIC, withdrawn its written consent to the inclusion
in this PDS of its valuation report in relation to Oran Park,
Sydney in the form and context in which that summary is
included in Section 9.1, and to be named in this PDS.
Knight Frank has given and has not, before the lodgement
of this PDS with ASIC, withdrawn its written consent to
the inclusion in this PDS of its summary valuation report
in relation to Minchinbury Hometown, Sydney in the form
and context in which that summary is included in Section 9.1,
and to be named in this PDS.
BDO Corporate Finance has given and has not, before the
lodgement of this PDS with ASIC, withdrawn its written
consent to the inclusion in this PDS of its summary valuation
report in relation to the preferred equity position in Noosa
North Shore, Noosa in the form and context in which that
summary is included in Section 9.1, and to be named in this PDS.
10.2 Disclosure of Interests
PricewaterhouseCoopers are entitled to receive professional
fees of approximately $35,000 (excluding GST) in connection
with the preparation of their Taxation Report in Section 9.3.
Deloitte Corporate Finance Pty Limited are entitled to receive
professional fees of approximately $70,000 (excluding GST)
in connection with the preparation of their Investigating
Accountants’ Report in Section 9.2.
M3 Property is entitled to receive professional fees of
approximately $15,500 (excluding GST) in connection with the
preparation of its valuation report in Section 9.1 covering the
property at MIAC, Melbourne.
Knight Frank is entitled to receive professional fees of
approximately $8,700 (excluding GST) in connection with
the preparation of its valuation report in Section 9.1 covering
the property at Richlands, Brisbane.
Colliers is entitled to receive professional fees of
the property at Oran Park, Sydney.
Knight Frank is entitled to receive professional fees of
the property at Minchinbury Hometown, Sydney.
BDO Corporate Finance is entitled to receive professional fees
of approximately $50,000 (excluding GST) in connection with
the investment in the project at Noosa North Shore, Noosa.
10.3 Summary of Material Agreements
The following is a summary of material legal documents
relating to the Fund. These include:
1. Constitution of the Fund
2. Underwriting Agreement
3. Master Development Agreement
4. Development Management Agreement –
Noosa North Shore
5. Irrevocable Offer for Erskine Park
6. Call Option for Noosa North Shore
7. Custody Deed
8. Conflict Management Strategy
9. Compliance Plan and Procedures.
The summaries are not intended to be exhaustive.
Constitution
Valad Opportunity Fund No. 11 is a registered managed
investment scheme. The responsible entity of the Fund
is Valad Commercial Management Limited (VCML).
The main rules governing the operation of the Fund are
set out in the Fund Constitution which is dated 8 April 2004,
and was amended by three supplemental deeds dated
19 and 21 April 2004 and 4 June 2004.
The Corporations Act, exemptions and declarations given
by ASIC, and the general law of trusts are also relevant
to the rights and obligations of VCML and of Unitholders
(who are referred to in this summary as members of the Fund).
Copies of the Fund’s Constitution are available free of
charge, on request. To obtain a copy please contact Valad
Property Group on 1800 VALAD1 (1800 825 231). The following
brief summary does not refer to every provision of the
Constitution and should be read in conjunction with other
references contained in this PDS.
The main provisions of the Constitution that deal with the
rights and obligations of members are as follows.
> Units: a fully paid Unit confers an equal undivided interest
in the Fund’s assets. The Constitution contemplates the
issue of partly paid units, but this is not proposed as part
of the Offer
> Income: subject to the terms of issue of particular units,
members are entitled to a share in distributions of the Fund’s
income proportionate to their paid-up Unitholding. VCML
may determine the amount to be distributed for a period as
at a point in time. VCML may effect a distribution of income
or capital (including redemption proceeds) to members by
transferring Assets of the Fund to the members
> Transfer: Units or options may be transferred in any
form approved by the Manager. Any Units classified as
“restricted securities” under the ASX Listing Rules cannot
be transferred or dealt with by the Manager if it amounts or
would amount to a breach of the ASX Listing Rules
> No redemption: there is no right to redeem Units while
the Fund is listed on ASX or is an illiquid scheme
> Winding up: if the Fund is wound up, members are entitled
to receive a share of the value of the Fund’s assets, after
meeting all liabilities and expenses proportionate to their
paid-up Unit holding. The Fund continues until the earliest
of the date on which the Fund terminates according to the
Constitution or by law, the date specified by the Manager
in a notice to members, or the date nominated by VCML
and approved by a special resolution of members as the
termination date. From the 80th anniversary of the day the
Fund commenced, no Units may be issued or redeemed.
> Members’ liability: unless a member incurs “user pays”
fees or makes a separate agreement with VCML, their
liability is limited under the Constitution to the amount
(if any) which remains unpaid in relation to their Units,
although higher courts are yet to determine the effectiveness
of provisions of this kind. User pays fees include taxes
or expenses that VCML incurs as a result of a particular
member’s request, act or omission
111
> Meetings: members’ rights to requisition, attend and vote
at meetings are mostly prescribed by the Corporations Act.
The Constitution provides that the quorum for a meeting is
normally at least two members holding at least 10% of Units.
It allows meetings by electronic means including telephone.
The Constitution also deals with the powers, duties and
liability of VCML as responsible entity as follows:
> Powers: VCML has powers to invest, borrow and generally
manage the Fund subject to the Fund’s principal investment
policy, which is to invest directly or indirectly (for example
through the purchase of interests in a managed investment
scheme, equities, debentures or other debt securities
or hybrid securities, or by entering into development
management, joint venture or profit sharing agreements) in
real property or to develop, subdivide, reposition, refurbish,
redevelop or trade property assets; to make such other
investments with the Fund assets which in VCML’s opinion
are not required for property investments; and to acquire
and dispose of derivatives in relation to investments and
borrowings. The policy may be changed on reasonable notice
to members. VCML also has power to issue units and options
over units on such terms as it determines
> Duties: VCML’s duties as responsible entity are mainly
contained in the Corporations Act and include the duty to
act honestly and in the best interests of members, and
to exercise the degree of care and skill that a reasonable
person would exercise if they were in the Responsible
Entity’s position
> Rights: VCML may recover out of the Fund’s assets
expenses properly incurred in the operation of the Fund
including (but not limited to) expenses connected with
underwriting the offer of Units, custody of the Assets
(including custodian fees) and the fees of any development
manager or other agents, valuers, contractors or advisers
including those who are associates of the Manager.
The Constitution also authorises VCML to charge a trust
management fee of 0.2% per annum (plus GST) of the gross
value of the Fund’s assets calculated as at the end of each
calendar month and payable within seven days of the end
of the relevant month.
> If VCML becomes liable to pay GST in respect of supplies
connected with the Fund, then it is entitled to be paid an
additional amount because of this. VCML may accept lower
fees than it is entitled to receive or defer payment for any
period during which the fee accrues daily until paid. For
the fees VCML proposes to charge, see Section 7
112
> VCML may also:
– take and act upon advice from professionals
– value the assets of the Fund at any time (at market
value unless it determines otherwise)
– determine the net asset value of the Fund at any time,
including more than once a day
– hold Units in the Fund in any capacity, contract with
itself or any associate, and may be interested in such
contract
– retire as responsible entity (but normally only if
members have approved a replacement)
– amend the Constitution, but only with members’
approval, unless the change will not adversely affect
members’ rights
> Liability: VCML is not liable in contract, tort or otherwise
to members for any loss suffered relating to the Fund except
to the extent that the Corporations Act imposes such liability.
VCML is entitled to be indemnified out of Fund assets for any
liability it incurs in properly performing or exercising any of
its duties or powers in relation to the Fund
> Restructure: the Constitution specifically provides that
VCML may unilaterally, and without the consent of members,
give effect to a proposal under which Valad will acquire
members’ Units in exchange for stapled securities in Valad.
However, any acquisition must be made on the basis that:
– members’ Units will be valued on the basis of the net
asset value of the Fund no later than two months before
the time Units are exchanged
– the stapled securities of Valad will be valued on the
basis of the volume weighted average of the stapled
securities over a period of 15 days preceding the date
of their issue, less any accrued distribution calculated
as at the last day of the trading days for pricing
– Valad stapled securities would be issued or
transferred to Fund members at a 2% discount to this
valuation
– any stamp duty in relation to the exchange will not be
borne by the Fund members or out of the assets of the Fund
– the acquirer of the Units in the Fund makes disclosure
to Members in relation to the stapled securities to the
extent required by law
– members resident outside Australia may not receive
stapled securities. The securities they would have
received will be sold on their behalf and the cash proceeds
(net of expenses) paid to them.
VCML does not presently intend to carry out such a
restructure. If it wishes to do so in the future, it would give
Unitholders at least 60 days notice before commencing
the process.
Underwriting Agreement
The Responsible Entity has entered into an underwriting
agreement with NAB (“Underwriter”) to underwrite
this Offer, and to subscribe for any of the Units that are
not applied for as at the Closing Date. The Offer will be
fully underwritten by NAB. We must pay a fee to NAB to
underwrite the Offer which we will pay from the capital
raised under the Offer upon Allotment.
We must accept all valid Applications provided that the
acceptance of the Applications does not cause us to breach
the Constitution.
The Underwriter may terminate its obligations under the
underwriting agreement if any of the following events occur:
> NAB terminates its mandate with us dated 6 March 2007
> a condition precedent to the underwriting is not satisfied,
including NAB receiving a copy of management sign-off and
verification sign-off, copy of the due diligence report and a
copy of this PDS
> VCML retires or is removed as the responsible entity for
the Fund
> Offer conditions are not met, or the PDS is defective, or
omits any material information required by the Corporations
Act, or contains a statement which is or becomes materially
misleading or deceptive or otherwise fails to comply with the
Corporations Act and no supplementary product disclosure
statement is issued to correct this
> a supplementary product disclosure statement is issued
to prospective Unitholders in a form that has not been
approved by the Underwriter
> this PDS or any supplementary product disclosure
statement or any part of the Offer is withdrawn without the
consent of the Underwriter (or an event occurs which results
in the Offer being withdrawn or not proceeded with)
> the S&P/ASX 200 Index or S&P/ASX 200 Property Index
falls by 10% from the date of the underwriting agreement
and stays at or below that level for at least three Business
Days or until the Business Day before the Allotment date
> at any time, the yields for treasury bonds issued by the
Reserve Bank of Australia which have a tenor of 10 years
increase by 100 basis points or more above the yields for
those treasury bonds at the date of the agreement
> VCML does not provide a closing certificate as and when
required or a statement in any closing certificate is untrue
or incorrect in a material respect
> Any event specified in the timetable of the Offer is delayed
for more than four Business Days without the prior consent
of NAB (such consent not to be unreasonably withheld)
> VCML fails to lodge an “in-use notice” with ASIC as
required by the Corporations Act and to comply with any
request made by ASIC in relation to the Offer
> in relation to the Offer, ASIC issues a stop order, holds
a hearing under section 1020E(4) of the Corporations Act,
makes an application for an order under Part 9.5 of the
Corporations Act, or commences an investigation or hearing
under the Australian Securities and Investment Commission
Act 2001 (Cth)
> there is a disruption in financial markets in Australia
or the international financial markets, or any development
involving a prospective change in national or international
political, financial or economic conditions, the effect of
which is such as to make it, in the reasonable opinion of the
Underwriter, impracticable to market the Offer or to enforce
contracts to issue the Units
> any person (other than the Underwriter), whose consent
to the issue of the PDS is required, refuses to give their
consent or having previously consented to the issue of this
PDS withdraws such consent
> an insolvency event occurs in respect of the
Responsible Entity or the Fund; or
> VCML, the Fund or its controlled entities launches,
or assists in launching a competing offer without prior
approval from NAB.
Further, the Underwriter may terminate its obligations
under the underwriting agreement if any of the following
events occur and in its reasonable opinion the event will
have a material adverse effect on the success of the Offer
or subsequent selldown of any shortfall Units, or would be
likely to give rise to a material liability of the Underwriter:
> the report of the due diligence committee to the Offer,
or any other information supplied to the Underwriter in
relation to the Fund, the Responsible Entity or the Offer is,
or becomes, misleading or deceptive
> an adverse change occurs in the financial position or
performance of the Responsible Entity or the Fund
> any of the Fund or its controlled entities is suspended
or removed from the ASX other than as contemplated by
the Offer
113
> any material contract summarised in this PDS is
terminated (whether by reason of a breach or otherwise),
rescinded, altered or amended in a material respect without
the prior written consent of the Underwriter
> any statement by VCML in this PDS which relates to future
matters (including the target return) is or becomes, in the
reasonable opinion of the Underwriter, unlikely to be met
> there is a change of law intended to come into effect
within 12 months, any of which does or is likely to prohibit
or regulate the Offer
> there is a change in the Board of the Responsible Entity
or the parent company of the Fund or its controlled entities
> if a director or other officer of the Responsible Entity
is charged with a criminal offence or is disqualified from
managing a corporation under the Corporations Act
> if any government agency commences any public
action against the Responsible Entity or any of our
Directors or other officers or announces that it intends
to take such action
> the Responsible Entity contravenes the Corporations
Act or the Constitution, or if VCML, or any of its officers, are
charged in relation to fraudulent, misleading or deceptive
conduct whether or not in connection with the Offer
> VCML defaults in the performance of any of its
undertakings or obligations under the underwriting
agreement, or a representation or warranty made by
VCML or the Fund under the underwriting agreement is,
or becomes, untrue or incorrect in a material respect
> without the prior written consent of the Underwriter,
the Constitution is altered in any material respect except
for amendments to facilitate the Offer, the form of which
has been approved by the Underwriter (such approval not
to be unreasonably withheld or delayed), before the date
of this PDS; or
> hostilities not presently existing commence (whether
war has been declared or not) or a major escalation in
existing hostilities occurs (whether war has been declared
or not) involving any one or more of Australia, New Zealand,
the United States of America, the United Kingdom, North
Korea, South Korea, the Republic of China, Indonesia, Iran
or any member state of the European Union or a major
terrorist act is perpetrated on any of those countries or any
diplomatic, military, commercial or political establishment
of any of those countries elsewhere in the world.
114
If NAB terminates its obligations under the underwriting
agreement, and if a suitable replacement is not found,
the Offer will not proceed and your Application Monies
will be returned to you as soon as practicable without
interest.
Master Development Management Agreement
The Responsible Entity, VDML and TCL have entered into a
development management agreement. VDML is appointed
development manager by VCML to provide development
management services in respect of any property acquired
by VCML or in respect of which VCML has acquired control.
The Agreement will terminate if any of the following
events occur:
> sale of the properties after completion of the
developments
> breach by VDML under the circumstances
summarised below; or
> breach by VCML under the circumstances
summarised below.
The agreement sets out the following:
> VDML’s duties – VDML will develop the properties in
accordance with a commercial assessment agreed between
VDML and VCML
> After the date of the Agreement, VDML shall, in the
name of RP 1 Pty Limited and on its behalf, enter into all
contracts and take all other steps necessary or desirable
to develop and manage the property in accordance with the
agreed commercial assessment including finding tenants,
negotiating leases, finding a purchaser and negotiating
contracts for sale
> Fees – VDML is entitled to fees for its services as set out
in Section 7
> Agreement to remain with property during development
– RP 1 Pty Limited shall not mortgage, assign, or otherwise
deal with (whether at law or in equity) all or any part of its
right, title and interest in the properties during the term
of this Agreement, without first procuring that any such
mortgagee, assignee or other disponee (as the case may
be) enters into an agreement with VDML (in such form as
VDML may require) acknowledging that it is bound by the
obligations and agreements on the part of VCML contained
in this Agreement as if it were one of the parties named in
this Agreement. VFML shall ensure that RP 1 Pty Limited
complies with this obligation
> VCML may not (on behalf of RP 1 Pty Limited), prior to
the completion of the developments, sell so many of the lots
as have not been sold without first procuring that any such
purchaser enters into an agreement with VDML (in such
form as VDML may require) providing for VDML to provide
development management services to the purchaser in
respect of the property on the same terms and conditions
as this Agreement
> Indemnity – VDML agrees to indemnify VCML as the agent
of RP 1 Pty Limited, from and against all actions, claims,
demands, losses, damages, costs and expenses or other
legal liability (Losses) for which VCML becomes liable in
respect of negligence by VDML or its contractors including
injury to persons (including death), or damage to property
(except to the extent that the Losses are caused by the
negligence or other wrongful acts or omissions on the part
of VCML)
> Termination – VCML may terminate the Agreement if
VDML is in material breach of the Agreement and has not
remedied the breach on 60 Business Days notice
– If the breach is not capable of being remedied,
VCML may only terminate the Agreement if reasonable
compensation for the breach is not paid by VDML to VCML
within 90 Business Days
– If VCML terminates the Agreement, VDML is entitled to
its accrued management fees to the date of termination
and a performance fee based on the realisable value of
the property as at the date of termination
– VDML may terminate the Agreement if VCML is in
breach of the Agreement and has not remedied the
breach on 20 Business Days notice (or 10 Business Days if
the breach relates to payment of money)
– If VDML terminates the Agreement, VDML is entitled
to receive the fees it would have been entitled to receive
if the development was completed in accordance with
the feasibility study
> Capacity – Each party enters into the agreement only in its
capacity as trustee or custodian (as relevant) and the liability
of each is limited to its ability to be actually indemnified out
of the relevant trust’s assets.
Development Management Agreement – Noosa North Shore
If VOF acquires an interest in Noosa North Shore, then
VOF will appoint VDML as development manager in
respect of its interest in the Noosa North Shore Project.
The development manager will oversee Petrac’s
construction and development of the Project and be
responsible for looking after VOF’s interest in the Project.
The fee structure for the Noosa North Shore investment will
be the same as for other Projects with the exception that no
Development Fee will be charged.
Irrevocable Offer to Acquire Interest in Units – Erskine Park
The trustee of Erskine Park Development Trust (EPDT) is the
registered holder of the Erskine Park property (see Section
2.4). The custodian for the trustee (Trustee) of VOF Erskine
Park Development Holdings Trust (Holding Trust), a sub
trust of VOF, holds 36 of the 100 units on issue in EPDT. If the
Offer is successful and an application is made to de-list VOF,
VOF will realise the value of its investment in the Erskine
Park property pursuant to this irrevocable offer, which is in
the form of a deed. Under the deed the responsible entity
of Valad Property Trust (VPT) makes to the custodian and
the Trustee (and any replacement custodian and Trustee)
a conditional irrevocable offer which requires VPT to pay
for the benefit of the Holding Trust an amount equal to the
value of its 36% interest in EPDT if and when the holder of
the 36 EPDT Units (whether the custodian or Trustee or
replacement) declares a trust over those units in favour of
VPT. The terms on which the declaration of trust must be
made are annexed to the deed.
ICA Erskine Park Development Holdings Pty Ltd as trustee of
ICA Erskine Park Development Holding Trust holds the other
64% of units in EPDT, and it intends to realise the value of its
investment in a similar manner.
The amount payable to VOF under the deed is $7,857,000
being 36% of the total value of the Erskine Park Property
(net of debt) as supported by two independent valuations.
The irrevocable offer has an expiry date of 31 July 2007.
Deed of Assignment for Noosa North Shore
On or before the date of this PDS, VFML as agent for the
trustee of the Valad Property Mezzanine Fund will assign
all of its rights, title and interests in the Noosa North
Shore Project to VCML as trustee of the Valad Property
Mezzanine Fund.
115
Call Option for Noosa North Shore
> in dealing with related Valad entities such as VDML
Under this agreement, VCML grants to VOF an option to
purchase an interest of up to a maximum of $10.1 million of
VCML’s interest in the Noosa North Shore Project (at VOF’s
discretion). VOF must make its determination prior to 31 July
2007. The price payable for its interest in Noosa North Shore
will be a pro rata proportion of the preferred equity in the
project as determined by VCML.
> in other cases, depending on the facts.
Following the capital raising under this PDS, VOF will
determine whether or not to purchase an interest in Noosa
North Shore and the extent of that interest (based on the
determined value and available capital). VOF is under no
obligation to acquire any part of Noosa North Shore until
making such determination.
Custody Deed
The Custody Deed between TCL (Custodian) and VCML
as Responsible Entity is dated 11 October 2002, and
was amended on 13 April 2004 to cover the Custodian’s
appointment in respect of the Fund. The Custody Deed
appoints the Custodian to hold the Fund’s property on VCML’s
behalf, and also covers property of any controlled subtrusts.
The Custodian will act in accordance with the instructions
of VCML. The terms of the Custody Deed include the specific
requirements of ASIC policy.
Conflict Management Strategy
Introduction
Valad Funds Management Limited, or one of its subsidiaries,
(collectively: VFML) is the Responsible Entity for several
collective investment schemes and other managed funds
(collectively, the Funds), and operates a property and land
development business.
VFML recognises that it may be faced with potential conflicts
in meeting its separate responsibilities to each of its existing
and future mandates in areas such as:
> the purchase of property investment opportunities and its
ownership across Funds
> the sale of a property of any of the Funds
> leasing deals in any market where more than one of the
Funds owns lettable premises or occupies lettable space
> the sale of a development project or other asset to a Fund
of which VFML is the Responsible Entity or of which the
Responsible Entity is a subsidiary of VFML
116
This summary outlines the principles by which VFML will
resolve potential conflicts in a manner which is equitable
to each of the Funds.
General Principles of Resolution
1. VFML is committed to the resolution of conflicts in a
manner which is equitable to each of the Funds.
2. This commitment is expressed through:
(a) the application of this Resolution of Conflict Strategy
as a policy endorsed by the boards of VFML; and
(b) the creation of an understanding of this Resolution of
Conflict Strategy amongst the relevant VFML staff so that
they are able to identify situations of potential conflict at
the earliest stage.
3. The Resolution of Conflict Strategy contains some
guidelines for use in circumstances which may reasonably
be foreseen. The Resolution of Conflict Strategy will be
reviewed at least annually for continuing application and
any proposed alterations presented to the VFML boards.
4. The Chief Executive Officer of VFML has executive
responsibility for the observance of the Resolution of
Conflict Strategy and may, if considered appropriate, obtain
the opinion of any independent expert on any matter to assist
in the application of the policy.
General Approach
The cornerstone of Valad’s Resolution of Conflict Strategy
is the development and documentation of a clear investment
strategy for each Fund. The Fund Managers, in consultation
with their teams, must review the strategy of the Fund
including key issues such as likely acquisitions/divestments,
leasing, developments, capital expenditure requirements
and funding capabilities or requirements.
The other important element of Valad’s Resolution of Conflict
Strategy is an organisational structure which differentiates
the Funds and their business activities and creates a specific
business focus.
Within the organisational structure, the role of Fund
Manager is pivotal to the independence of the Fund.
Each Fund Manager is responsible for the direction
and performance of one or more Funds that do not have
competing investment strategies.
> finance and administration
Any Fund Manager may pursue the acquisition of an asset
being sold by another Fund. At the discretion of the vendor
Fund, an asset may be offered to the other Funds as an off
market transaction with the price being determined under
an agreed independent valuation procedure or process in
accordance with the Fund’s policies either as set out in its
offer document or as communicated to investors.
> company secretariat and legal.
Acquisition of Assets
In the event that confidential information relating to one Fund
becomes known to another and this information is not openly
available outside the business unit, then no use can be made
of that information without the approval of the party to which
the information relates.
Each Fund Manager has the right to pursue the acquisition of
any asset which meets the investment objectives of the Fund,
so long as that Fund has the financial capacity to make such
an acquisition.
The support services of the business unit assist each
Fund in the provision of specialised services as required.
These services include:
> acquisitions/divestments/leasing/research
> developments
Guidelines
Organisation – Responsible Executive
A Fund Manager will have exclusive responsibilities for
a particular Fund or Funds, and will be responsible to
champion the cause of the relevant Fund.
Fund Strategic Plans
The Fund Manager will devise and the board of VFML will
consider and, if thought fit, approve a clear investment
strategy for the Fund. The Fund Manager of each Fund must
constantly review and will maintain the investment strategy
of the fund including details of key issues of acquisition/
divestments; development and capital expenditure; leasing
and investment return objectives; and the funding capacity
of the Fund.
Leasing
Each Fund Manager acts independently of other Fund
Managers on leasing activities within the parameters of
strategic and asset plans for the relevant Fund. Usually,
external leasing agents will be included in some but not
all leasing negotiations with prospective tenants.
Disposal of Assets
Each Fund Manager will be ultimately responsible for the
sale of the Fund’s assets on the open market. It is likely that
the vendor Fund will appoint external selling agents.
The Fund Manager of the vendor Fund is responsible for
the recommendation of the final terms of the transaction.
When VFML identifies investment opportunities, a
conference must be held or Preliminary Investment
Proposal must be prepared providing sufficient detail
about each asset to enable each separate Fund’s Manager
to decide whether to pursue the purchase.
After receiving the Preliminary Investment Proposal,
each Fund Manager must promptly advise the Chief
Executive Officer of VFML if he/she intends to pursue
the acquisition of that asset. If more than one Fund wishes
to proceed then the asset can be pursued on one of the
following bases:
1. an agreed shared ownership basis with another Fund; or
2. full ownership.
The costs of due diligence shall be borne by the Fund,
or Funds, which successfully pursue the opportunity.
Sale of VFML Development or Fund Assets
Assets may be sold externally, or offered to a Fund. A Fund
Manager will proceed only where all considerations provide
an overall integrity to the Fund.
Method of Resolution of Conflicts
Potential conflicts will immediately be referred to the
Chief Executive Officer of VFML who will:
> resolve the conflict by reference to the Resolution
of Conflict Strategy; or
> if the conflict is not able to be resolved that way,
refer it to a committee of the VFML Board.
117
Renewal
10.6 Further Information
It is intended that this Resolution of Conflict Strategy
will be reviewed in April of each year and any appropriate
amendments be agreed upon by the boards of VFML.
The Responsible Entity has placed on file the following
documents, copies of which are available free of charge
to existing and potential investors:
Compliance Plan and Procedures
1. VOF Constitution and amendments
The compliance plan for the Fund describes the procedures
VCML will apply in operating the Fund to ensure compliance
with the Corporations Act and the Constitution.
2. Knight Frank property valuation report – Richlands
The Board of Directors of VCML will oversee VCML’s
procedures for complying with the compliance plan,
the Constitution and the Corporations Act.
Copies of the compliance plan and Constitution are available
free of charge until the Offer closes and can be obtained by
contacting VCML on 1800 Valad1 (1800 825 231).
10.4 Role of NAB
NAB is the Sole Arranger and Underwriter of the
Offer. In addition, NAB is one of the providers of senior
debt facilities to the Fund, and may provide interest
rate hedging products. In these capacities, NAB will,
if necessary, act to protect its interests ahead of those
of investors and other parties. NAB gives no advice as to
whether any person should invest in Units and does not in
any way guarantee or assure the return of any investments,
or the performance of the investment generally.
10.5 Complaints
If you have a complaint about VCML in connection with
the Fund, then please:
> contact us on 1800 Valad1 (1800 825 231) from 8.00am
to 6.00pm (Sydney time) Monday to Friday; and
> if your complaint is not satisfactorily resolved,
please refer the matter in writing to the Complaints
Handling Officer, Valad Commercial Management Limited,
PO Box N817, Grosvenor Place NSW 1220.
If your complaint is not resolved within 45 days, you may
have the right to take your complaint to the Financial
Industry Complaints Service Limited at 31 Queen Street,
Melbourne VIC 3007, telephone: (03) 9621 2291 or toll free
1800 780 808. VCML is a member of FICS. ASIC also has
a toll free info line on 1300 300 630 which you may use to
complain and obtain information about your rights.
118
3. Knight Frank property valuation report – Minchinbury
4. M3Property property valuation report – MIAC
5. Colliers valuation report – Oran Park
6. BDO Corporate Finance valuation report
– Noosa North Shore
10.7 Availability of Documents
VCML is a disclosing entity for the purpose of the Corporations
Act and is therefore subject to regular reporting and disclosure
obligations under the Corporations Act. VCML is required to
prepare and lodge with ASIC annual and half-yearly financial
statements accompanied by a directors’ declaration and
report, and an auditor’s report. Copies of documents lodged
in relation to VCML may be obtained from, or inspected at, an
office of ASIC.
You have the right to obtain a copy of each annual report, halfyearly report and any continuous disclosure notice from VCML
since the lodgement of the 2006 annual report, free of charge.
VCML will provide a copy of any of the above documents free
of charge to any person who requests a copy during the Offer
period in relation to this PDS. Requests may be made by
contacting VCML on 1800 VALAD1 (1800 825 231).
> 11 GLOSSARY
> 11 GLOSSARY
The following is a glossary of the terms used in this PDS.
$
All dollar amounts are in Australian dollars, unless otherwise stated
AASB
Australian Accounting Standards Board
ABN
Australian Business Number
Adjusted NTA
Net tangible assets of the Fund adjusted to take account of the fair market value of the
Asset Portfolio, accrual of performance fees and other items as detailed in Section 8.2
AEST
Australian Eastern Standard Time
AFSL
Australian Financial Services Licence
AIFRS
Australian Generally Accepted Accounting Practices which comprise Australian equivalents
to International Financial Reporting Standards
Allotment
The allotment of Units following the Closing Date
Allotment Date
The date upon which the Units are allotted, being 9 July 2007, unless otherwise determined by VCML
Applicant(s)
Person(s) who submit(s) a valid Application Form pursuant to this PDS
Application
An application to subscribe for Units under this PDS
Application Form
The Application Form accompanying or attached to this PDS
Application Monies
Monies received from Applicants in respect of their Applications
ARSN
Australian Registered Scheme Number
Asset Portfolio
The proposed portfolio of Projects
ASIC
Australian Securities and Investments Commission
BBSY
Australian Bank Bill Swap Reference Rate used to determine the benchmark interest rate to price
variable rate loans
ASX
ASX Limited or the stock market operated by it as the context requires
Board
The Board of Directors of the Company and/or the Responsible Entity as the context requires
Business Day(s)
A day other than a Saturday or Sunday on which trading banks are open for general banking business
in Sydney
Closing Date
29 June 2006 or such date as VCML may determine
Corporations Act
Corporations Act 2001 (Cth) as amended from time to time
Development Manager
Valad Development Management Pty Limited ACN 100 248 637
Director
A Director of the Responsible Entity from time to time
DMA
Development Management Agreement
Fund
Valad Opportunity Fund No. 11 ARSN 108 693 876
Fund Constitution
The Constitution of the Fund dated 8 April 2004 as amended
GST
Deloitte Corporate Finance Pty Ltd (ACN 74 490121 060)
IRR or Internal
Rate of Return
The discount rate that results in a net present value of zero for a series of future cash flows.
The internal rate of return is generated by an investment over its life or a given timescale,
taking into account the purchase price and sale proceeds and all cash flows associated with
the holding. Unless otherwise stated, an IRR where quoted in this PDS is on a pre-tax post-fees
and expenses basis.
Issue Costs
The fees and expenses of the Offer set out in Section 7
120
Issue Price
$1.01 per Unit
Issued Equity
The value of each Unit calculated as the Issue Price less any returns of capital previously
made by the Fund
Issuer
VCML
LVR
Loan to Value Ratio
NAB
National Australia Bank Limited ACN 004 044 937
Notice
Notice of the Withdrawal Offer to Unitholders in VOF
NTA
Net Tangible Assets
Offer
The offer of Units under this PDS
Offer Period
The period during which the Offer is open for receipt of Application Forms, which is 3 May 2007
to 29 June 2007 unless varied by VCML in consultation with the Sole Arranger and Underwriter
PDS
This product disclosure statement dated 3 May 2007
Performance Fee
The fee payable to VDML satisfying certain equity outperformance conditions, calculated in
accordance with the Development Management Agreements and summarised in Section 7
Petrac
Petrac Limited, development manager for the Noosa North Shore project
Pro-forma NTA
Net tangible assets of the Fund assuming the occurance of the pro-forma adjustments as at
Allotment Date listed in Section 8.2
Project
Each of the projects as listed in Section 5
Property
A property in the Asset Portfolio as listed in Section 5
Purchase Price
Property acquisition price
Registry
Responsible Entity
VCML
Sole Arranger
and Underwriter
National Australia Bank Limited ACN 004 044 937
Target IRR
The target IRR as stated in the Investment Summary
TCL
Trust Company Limited
Unitholder
A holder of Units
Units
Units in the Fund
Underwriting Agreement
The agreement between VCML and NAB dated 3 May 2007 under which NAB has agreed to
underwrite the Offer
Valad
The group listed on the ASX comprising the Valad Property Trust (of which VCML is the responsible
entity) and Valad Funds Management Limited whose units and shares are stapled together and
quoted on the ASX as stapled securities and includes as the context permits, their controlled entities
VCML
Valad Commercial Management Limited (ABN 76 101 802 046: ACN 101 802 046: AFSL 223339)
VDML
Valad Development Management Pty Limited ACN 100 248 637
VFML
Valad Funds Management Limited
VOF
Withdrawal Offer
Offer to Unitholders in VOF as at 3 May 2007 to redeem their Units
121
> 12 APPLICATION
FORMS
HOW TO COMPLETE THE APPLICATION FORM
1. Number of Units applied for
Enter the number of Untis you wish to apply for. The Application must be for a
minimum of 20,000 Units and thereafter in multiples of 1 Unit.
2. Are you a new investor or an existing investor?
If you are an existing investor and would like units from this Application added to
your existing holding, please insert the Securityholder Reference Number (SRN)
or Holder Identification Number (HIN) of your existing account. Otherwise if you
are a new investor or would like a new investment created, please tick the New
Investor box.
3. Applicant details
Enter the full name which you wish to appear on your statement of unitholding.
This must be your own name or the name of a company. Joint Applications are
also acceptable. The table below indicates correct forms of registrable title.
Enter your postal address for all correspondence. All communications will be
mailed to the person(s) and address as shown. For joint Applicants only one
address can be entered.
If you are applying as an existing investor and the address on this Application
differs to your current address, the address on this Application will be used for
any future correspondence.
4. Telephone and email details
Please enter your telephone and email details. This will allow us to contact you if
there are any issues with your applications or subsequently.
5. Cheque details
Make your cheque, bank draft or money order payable to “Valad Commercial
Management Limited: Applications Account” in Australian currency and
cross it “Not Negotiable”. Your cheque or bank draft must be drawn on an
Australian bank. Sufficient cleared funds should be held in your account as
cheques returned unpaid are likely to result in your Application being rejected.
Pin (do not staple) your cheque or bank draft to the Application Form where
indicated.
Please enter details of the cheque, bank draft or money order that you attach with
this Application.
6. Distribution payments
Please provide bank account or building society details for payment of
distributions.
If you do not complete this section, distributions and redemption payments will be
paid to you by cheque.
7. TFN or ABN (if company) or Exemption Category
Enter your TFN, exemption category or ABN if applicable. Provision of TFN(s)
and ABN(s) is not compulsory and will not affect your Application however, if
these are not provided the Fund will be required to deduct tax at the highest
marginal rate (including Medicare levy) from your distributions.
10. Signatures
This form must be signed. Applications which are not signed or not signed
correctly may be rejected.
Joint holders – all holders must sign.
Signature under Power of Attorney – if not already noted by the Registry, a
certified copy of the Power of Attorney must accompany this form. Where this
form is signed under Power of Attorney, the Attorney declares that the Attorney
has no notice of revocation of the power or death of the Attorney.
Deceased Estate – all executors must sign and, if not already noted by the
Registry, a certified copy of Probate or Letter of Administration must accompany
this form.
Company – this form must be signed by 2 directors or a director and company
secretary, or in the case of companies with a sole director who is also sole
company secretary, the sole director. Titles of all signatories should be indicated
and inapplicable titles be deleted.
LODGEMENT INSTRUCTIONS
Please mail this Application Form and your cheque(s), bank draft(s) or money order(s) to:
Mailing address: Valad Opportunity Fund No.11, C/- Link Market Services Limited, Locked Bag A14, Sydney South NSW 1235; or
Delivery address: Valad Opportunity Fund No.11, C/- Link Market Services Limited, Level 12, 680 George Street, Sydney NSW 2000.
PRIVACY STATEMENT
Link Market Services Limited advises that Chapter 2C of the Corporations Act 2001 requires information about you as a unitholder (including your name, address and
details of the units you hold) to be included in the public register of the entity in which you hold units. Information is collected to administer your unitholding and if some
or all of the information is not collected then it might not be possible to administer your unitholding. Your personal information may be disclosed to the entity in which
you hold units. You can obtain access to your personal information by contacting us at the address or telephone number set out in the important information located on
the inside front cover of the PDS. Our privacy policy is available on our website www.linkmarketservices.com.au.
CORRECT FORMS OF REGISTRABLE NAMES
Note that ONLY legal entities are allowed to hold Units. Applications must be in the name(s) of natural persons or companies. At least one full given name and the
surname is required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if
completed exactly as described in the examples of correct forms below.
Type of Investor
Correct Form of Registration
Incorrect Form of Registration
Individual
Use given names in full, not initials
Mrs Katherine C Edwards
K C Edwards
Company
Use Company’s full title, not abbreviations
Liz Biz Pty Ltd
Liz Biz P/L or Liz Biz Co.
Joint Holdings
Use full and complete names
Mr Peter P Tranche &
Ms Mary O Tranche
Peter Paul &
Mary Tranche
Trusts
Use the trustee(s) personal name(s)
Mrs Alessandra H Smith
<Alessandra Smith A/C>
Alessandra Smith
Family Trust
Deceased Estates
Use the executor(s) personal name(s)
Ms Sophia G Post &
Mr Alexander T Post
<Est Harold Post A/C>
Mrs Sally Hamilton
<Henry Hamilton>
Estate of late Harold Post
or
Harold Post Deceased
Master Henry Hamilton
Fred Smith & Son
Long Names
Mr Frederick S Smith &
Mr Samuel L Smith
<Fred Smith & Son A/C>
Mr Hugh A J Smith-Jones
Clubs/Unincorporated Bodies/Business Names
Use office bearer(s) personal name(s)
Mr Alistair E Lilley
<Vintage Wine Club A/C>
Vintage Wine Club
Superannuation Funds
Use the name of the trustee of the fund
XYZ Pty Ltd
<Super Fund A/C>
XYZ Pty Ltd
Superannuation Fund
Minor (a person under the age of 18 years)
Use the name of a responsible adult with an appropriate designation
Partnerships
Use the partners’ personal names
Mr Hugh A J Smith Jones
Put the name(s) of any joint Applicant(s) and/or account description using < > as indicated above in designated spaces at section 3 on the Application Form.
This page is left blank intentionally.
Pin Pin
cheque(s)
cheque(s)
herehere
(do not
(do not
staple)
staple)
Broker Code
Valad Commercial Management Limited (VCML)
ABN 76 101 802 046, AFSL 223339
as responsible entity for Valad Opportunity Fund No.11 (Fund)
ARSN 108 693 876
ABN 12 004 044 937
AFSL 230686
Adviser Code
Application Form
The securities to which this Application Form relates are units in the Fund (Units). Further details about the Units are contained in the PDS
dated 3 May 2007 issued by VCML. During the Offer period, paper copies of the PDS, any supplementary PDS and the Application Form,
will be available free of charge on request.
ASIC requires that a person who provides access to an electronic Application Form must provide access, by the same means and at the
same time, to the relevant PDS. This Application Form accompanies this PDS.
The PDS contains important information about investing in the Fund. You should read the PDS before applying for Units. Incomplete
Application Forms will be deemed to be valid if the Responsible Entity believes that suf¿cient information, with attached payment, has
been provided. Further particulars are contained in the section titled “How to Complete the Application Form” which appears on the last
page of this Application Form.
PLEASE WRITE CLEARLY USING BLOCK LETTERS
1
INVESTMENT AMOUNT
Insert investment amount. Minimum application amount is 20,000 units. Application amounts thereafter must be in multiples of 1 unit at
$1.01 per unit.
Units
2
,
,
.
Insert your SRN/HIN below if you would like new Fund
Units added to your existing holding
NEW OR EXISTING INVESTOR
NEW INVESTOR
3
A$
@$1.01
OR
EXISTING INVESTOR
FULL NAME AND DETAILS OF APPLICANT(S)
Title
Given Name or Company Name (Applicant 1)
Middle
Initial Surname
Title
Surname
Are you making the Application on behalf of a trust or superannuation fund (please tick)
Yes
No
Name of Trust or Superannuation Fund
Unit Number/Level
Street Number
Street Name
Suburb/City or Town
4
State
Postcode
TELEPHONE AND EMAIL DETAILS
Home
Work
Email
5
CHEQUE DETAILS
Cheque Number
BSB
Account Number
Amount Payable
Please enter details of the cheque(s) below that accompany this application. Cheques to be crossed “Not Negotiable” and made payble to
“Valad Commercial Management Limited: Application Account”. Please ensure that you submit the correct amount, incorrect
payments may result in your application being rejected.
6
DISTRIBUTION PAYMENTS
Name of Australian Financial Institution
BSB Number
Branch (full address)
Account Number
Name(s) in which Account is held
Page 1 of 4
VOF IPO001
*VOF IPO001*
$
7
APPLICANTS’ TFN OR ABN (IF COMPANY) OR EXEMPTION CATEGORY
TFN (Applicant 1)
TFN (Applicant 2)
ABN
Exemption Category
ABN Type – If not an individual, please mark the appropriate box
Company
8
Partnership
Trust
Super Fund
UNDERWRITER TRANSFERS
I/we agree and acknowledge that, if National Australia Bank
Limited (NAB) acquires Units pursuant to its obligations as
Underwriter, then in respect of those Units:
• this form may be treated as an offer by the Applicant to acquire
up to the number or value of Units speci¿ed in section 1 of this
form from NAB by way of transfer;
• NAB is not the issuer of Units in the Fund, and personal
information (including any tax ¿le number) I/we supply on this
form will be received by NAB and passed on to the Responsible
Entity to be used for the purposes referred to in this form;
• the PDS has been provided to me by and on behalf of both the
Responsible Entity and NAB, but that NAB is not the issuer of
Units and its responsibility for the content of the PDS is strictly
limited as set out in the Insider Front Cover of the PDS;
• the consideration for the units will be payable to NAB; and
• if this form is signed below for and on behalf of NAB, the sections
of this form titled “Transfer of Units” and “Transferor’s warranty”
will apply.
Transfer of Units Held by NAB
For the consideration referred to in section 1 of this form, NAB as
transferor/ seller hereby transfers the Units referred to in section 1
to the transferee/buyer named as the Applicant in section 3, subject
to the conditions on which NAB held the Units at the time of signing
this form and on the basis that the transferee/buyer accepts the
Units subject to the same conditions.
Where an attorney signs the transfer on behalf of NAB, the attorney
con¿rms they have not received any notice of revocation of the
Power of Attorney under which this transfer is signed.
Transferor’s warranty
By executing this form, NAB warrants that:
• it is the registered holder of the Units referred to in section 1;
and
• it is authorised and entitled to transfer the Units to the applicant,
free from all encumbrances.
Signed for an on behalf of National Australia Bank Limited:
Title
Name
9
Signature
FURTHER ACKNOWLEDGEMENTS
Capitalised terms in the Application Form have the same meaning
as in the PDS.
• I/We declare that I/we have read the PDS to which this
Application Form relates.
• I/We declare that this Application is completed according to the
declaration/acknowledgements within this form and agree to be
bound by the Constitution of the Fund (as amended from time to
time).
• I/We agree that the return of the Application Form with my/our
cheque for the Application Money will constitute an offer to apply
for Units in the Fund.
• I/We acknowledge that the Responsible Entity has the right to
reject my/our Application or allocate a lower number of Units
than I/we applied for.
• I/we agree that I/we cannot withdraw my/our Application except
as permitted by law.
• I/we acknowledge that the information contained in the PDS
does not constitute ¿nancial product advice or a recommendation
that Units are suitable for me/us, given my/our investment
objectives, ¿nancial situation and particular needs.
• I/we declare that this form is completed and lodged according to
the PDS and that all statements made by me/us are complete
and accurate.
• I/we declare that if signed by an Applicant corporation, this form
has been signed in accordance with section 127 of the
Corporations Act, the corporation’s constitution and applicable
laws.
• I/We declare that if signed by an attorney, the power of attorney
authorises the signing of this Application Form and no notice of
revocation has been received.
10
Date
• I/We acknowledge that by submitting an Application, I/we agree
and consent to all arrangements between the Responsible Entity
and members or related entities of Valad which are disclosed in
the PDS.
• I/We acknowledge that the PDS contains references to target
returns that the Responsible Entity considers to be reasonable
at the time of preparing the PDS but these are not forecasts and
may not be achieved due to factors outside the Responsible
Entity’s control and that actual results may vary materially from
the targets.
• I/We acknowledge that applications will only be accepted and
any income or capital distribution made by the Fund will only be
paid, in Australian currency.
• I/We declare that I/we are over 18 years of age I/we do not suffer
from any legal disability preventing me/us from applying for Units.
• I/We will not hold or control more than 19.9% of the Units on issue
at any one time unless consent is given by the Responsible Entity.
• I/we acknowledge that my/our investment in Units is not an
investment in, a deposit with, or any other type of liability of the
NAB Group, the Responsible Entity or any of their related bodies
corporate.
• I/We acknowledge that an investment in the Fund is subject to
investment risk, including possible delays in repayment and loss
of income or capital invested and agree that those risks are
appropriate for a person in my/our circumstances and with my/
our investment objectives.
• I/We acknowledge that none of the Responsible Entity, the NAB
Group or any of their related entities or af¿liates, or any other
person, in any way stands behind or guarantees the repayment
of capital from the Fund, the investment performance of the
Fund or any particular rate of return.
APPLICANT SIGNATURES
This form must be signed. I/We agree to apply for Units as instructed on this Application Form. I/We agree to be bound by the provisions
and the conditions of the issue of Units as set out in the PDS, the Constitution of the Fund and the Acknowledgements section in section 8
and 9 of this Application Form.
Applicant 1
2
SIGN HERE
Sole Director/Sole Company Secretary
Applicant 2
2
SIGN HERE
Applicant 3
2
Director/Company Secretary (delete one) Director
SIGN HERE
Date
/
/
Pin Pin
cheque(s)
cheque(s)
herehere
(do not
(do not
staple)
staple)
Broker Code
Valad Commercial Management Limited (VCML)
ABN 76 101 802 046, AFSL 223339
as responsible entity for Valad Opportunity Fund No.11 (Fund)
ARSN 108 693 876
ABN 12 004 044 937
AFSL 230686
Adviser Code
Application Form
The securities to which this Application Form relates are units in the Fund (Units). Further details about the Units are contained in the PDS
dated 3 May 2007 issued by VCML. During the Offer period, paper copies of the PDS, any supplementary PDS and the Application Form,
will be available free of charge on request.
ASIC requires that a person who provides access to an electronic Application Form must provide access, by the same means and at the
same time, to the relevant PDS. This Application Form accompanies this PDS.
The PDS contains important information about investing in the Fund. You should read the PDS before applying for Units. Incomplete
Application Forms will be deemed to be valid if the Responsible Entity believes that suf¿cient information, with attached payment, has
been provided. Further particulars are contained in the section titled “How to Complete the Application Form” which appears on the last
page of this Application Form.
PLEASE WRITE CLEARLY USING BLOCK LETTERS
1
INVESTMENT AMOUNT
Insert investment amount. Minimum application amount is 20,000 units. Application amounts thereafter must be in multiples of 1 unit at
$1.01 per unit.
Units
2
,
,
.
Insert your SRN/HIN below if you would like new Fund
Units added to your existing holding
NEW OR EXISTING INVESTOR
NEW INVESTOR
3
A$
@$1.01
OR
EXISTING INVESTOR
FULL NAME AND DETAILS OF APPLICANT(S)
Title
Middle
Initial Surname
Title
Surname
Are you making the Application on behalf of a trust or superannuation fund (please tick)
Yes
No
Name of Trust or Superannuation Fund
Unit Number/Level
Street Number
Street Name
Suburb/City or Town
4
State
Postcode
TELEPHONE AND EMAIL DETAILS
Home
Work
Email
5
CHEQUE DETAILS
Cheque Number
BSB
Account Number
Amount Payable
Please enter details of the cheque(s) below that accompany this application. Cheques to be crossed “Not Negotiable” and made payble to
“Valad Commercial Management Limited: Application Account”. Please ensure that you submit the correct amount, incorrect
payments may result in your application being rejected.
6
DISTRIBUTION PAYMENTS
Name of Australian Financial Institution
BSB Number
Branch (full address)
Account Number
Name(s) in which Account is held
Page 1 of 4
VOF IPO001
*VOF IPO001*
$
7
APPLICANTS’ TFN OR ABN (IF COMPANY) OR EXEMPTION CATEGORY
TFN (Applicant 1)
TFN (Applicant 2)
ABN
Exemption Category
ABN Type – If not an individual, please mark the appropriate box
Company
8
Partnership
Trust
Super Fund
UNDERWRITER TRANSFERS
I/we agree and acknowledge that, if National Australia Bank
Limited (NAB) acquires Units pursuant to its obligations as
Underwriter, then in respect of those Units:
• this form may be treated as an offer by the Applicant to acquire
up to the number or value of Units speci¿ed in section 1 of this
form from NAB by way of transfer;
• NAB is not the issuer of Units in the Fund, and personal
information (including any tax ¿le number) I/we supply on this
form will be received by NAB and passed on to the Responsible
Entity to be used for the purposes referred to in this form;
• the PDS has been provided to me by and on behalf of both the
Responsible Entity and NAB, but that NAB is not the issuer of
Units and its responsibility for the content of the PDS is strictly
limited as set out in the Insider Front Cover of the PDS;
• the consideration for the units will be payable to NAB; and
• if this form is signed below for and on behalf of NAB, the sections
of this form titled “Transfer of Units” and “Transferor’s warranty”
will apply.
Transfer of Units Held by NAB
For the consideration referred to in section 1 of this form, NAB as
transferor/ seller hereby transfers the Units referred to in section 1
to the transferee/buyer named as the Applicant in section 3, subject
to the conditions on which NAB held the Units at the time of signing
this form and on the basis that the transferee/buyer accepts the
Units subject to the same conditions.
Where an attorney signs the transfer on behalf of NAB, the attorney
con¿rms they have not received any notice of revocation of the
Power of Attorney under which this transfer is signed.
Transferor’s warranty
By executing this form, NAB warrants that:
• it is the registered holder of the Units referred to in section 1;
and
• it is authorised and entitled to transfer the Units to the applicant,
free from all encumbrances.
Signed for an on behalf of National Australia Bank Limited:
Title
Name
9
Signature
FURTHER ACKNOWLEDGEMENTS
Capitalised terms in the Application Form have the same meaning
as in the PDS.
• I/We declare that I/we have read the PDS to which this
Application Form relates.
• I/We declare that this Application is completed according to the
declaration/acknowledgements within this form and agree to be
bound by the Constitution of the Fund (as amended from time to
time).
• I/We agree that the return of the Application Form with my/our
cheque for the Application Money will constitute an offer to apply
for Units in the Fund.
• I/We acknowledge that the Responsible Entity has the right to
reject my/our Application or allocate a lower number of Units
than I/we applied for.
• I/we agree that I/we cannot withdraw my/our Application except
as permitted by law.
• I/we acknowledge that the information contained in the PDS
does not constitute ¿nancial product advice or a recommendation
that Units are suitable for me/us, given my/our investment
objectives, ¿nancial situation and particular needs.
• I/we declare that this form is completed and lodged according to
the PDS and that all statements made by me/us are complete
and accurate.
• I/we declare that if signed by an Applicant corporation, this form
has been signed in accordance with section 127 of the
Corporations Act, the corporation’s constitution and applicable
laws.
• I/We declare that if signed by an attorney, the power of attorney
authorises the signing of this Application Form and no notice of
revocation has been received.
10
Date
• I/We acknowledge that by submitting an Application, I/we agree
and consent to all arrangements between the Responsible Entity
and members or related entities of Valad which are disclosed in
the PDS.
• I/We acknowledge that the PDS contains references to target
returns that the Responsible Entity considers to be reasonable
at the time of preparing the PDS but these are not forecasts and
may not be achieved due to factors outside the Responsible
Entity’s control and that actual results may vary materially from
the targets.
• I/We acknowledge that applications will only be accepted and
any income or capital distribution made by the Fund will only be
paid, in Australian currency.
• I/We declare that I/we are over 18 years of age I/we do not suffer
from any legal disability preventing me/us from applying for Units.
• I/We will not hold or control more than 19.9% of the Units on issue
at any one time unless consent is given by the Responsible Entity.
• I/we acknowledge that my/our investment in Units is not an
investment in, a deposit with, or any other type of liability of the
NAB Group, the Responsible Entity or any of their related bodies
corporate.
• I/We acknowledge that an investment in the Fund is subject to
investment risk, including possible delays in repayment and loss
of income or capital invested and agree that those risks are
appropriate for a person in my/our circumstances and with my/
our investment objectives.
• I/We acknowledge that none of the Responsible Entity, the NAB
Group or any of their related entities or af¿liates, or any other
person, in any way stands behind or guarantees the repayment
of capital from the Fund, the investment performance of the
Fund or any particular rate of return.
APPLICANT SIGNATURES
This form must be signed. I/We agree to apply for Units as instructed on this Application Form. I/We agree to be bound by the provisions
and the conditions of the issue of Units as set out in the PDS, the Constitution of the Fund and the Acknowledgements section in section 8
and 9 of this Application Form.
Applicant 1
2
SIGN HERE
Sole Director/Sole Company Secretary
Applicant 2
2
SIGN HERE
Applicant 3
2
Director/Company Secretary (delete one) Director
SIGN HERE
Date
/
/
> IMPORTANT NOTICE
Responsible Entity and issuer of this PDS
ABN 76 101 802 046, AFS Licence Number 223339
is the Responsible Entity of the Valad Opportunity
Fund No. 11 (ARSN 108 693 876) (“Fund”) and is
the issuer of this Product Disclosure Statement.
> CORPORATE DIRECTORY
jurisdiction outside of Australia. This PDS does
not constitute an offer or invitation in any place in
which, or to any person to whom, it would not be
lawful to make such an offer or invitation.
The distribution of this PDS in jurisdictions
outside Australia may be restricted by law and
persons who come into possession of it who
are not in Australia should seek advice on and
observe any such restrictions. Any failure to
comply with such restrictions may constitute
a violation of applicable securities laws.
This Product Disclosure Statement (“PDS”)
relates to the offer of up to 27.024 million Units
at a price of $1.01 each (“Offer”).
This PDS is dated 3 May 2007. This PDS is not
required to be lodged with ASIC. ASIC takes no
Disclaimers
responsibility for the contents of this PDS. You
Investments in the Fund do not represent
should only rely on the information in this PDS.
investments in, deposits with or other liabilities of
No person is authorised to give any information
NAB, Valad Property Group (“Valad”) or any other
or to make any representation in connection
member of the National Australia Bank or Valad
with the Offer which is not contained in this PDS.
Any information or representation not contained
groups of companies.
in this PDS may not be relied upon as having
None of the Responsible Entity, Valad, NAB
been authorised by the Responsible Entity in
and any of their respective directors, officers or
connection with the Offer.
associates stands behind the capital value nor
This is an important document that needs
guarantees the performance of the investment
your attention. If you are in any doubt as to how to
or the underlying assets in the Fund nor provides
interpret or deal with it, consult your financial
a guarantee or gives any assurance as to the
adviser.
performance of the investment, the repayment of
capital or any particular rate of capital or income
Electronic PDS
return.
This PDS may be viewed online on the Fund’s
website at www.vof.com.au or on National
The National Australia Bank group of companies
Australia Bank Limited’s website at
(NAB Group) may also provide debt, treasury
www.nabmarkets.com/valad.
and other services to the Fund or its controlled
If you access the electronic version of this PDS,
entities. These services are provided in various
you should ensure that you download and read the capacities as a third party provider and the NAB
entire PDS.
Group will act if necessary to protect its interests
A paper copy of this PDS is available free of charge ahead of those of Investors and other parties. In
to any person in Australia before the Closing Date
acting in its various capacities in connection with
of the Offer by telephoning NAB on 1800 652 669.
the Fund, the NAB Group will have only the duties
and responsibilities expressly agreed to by it in the
Up to date information
relevant capacity and will not, by virtue of acting
Information relating to the Offer that is not
in any other capacity, be deemed to have other
materially adverse may change from time to
duties or responsibilities or be deemed to owe a
time. This information may be updated and made
standard of care other than as expressly provided
available at www.vof.com.au or by telephoning
with respect to each such capacity.
NAB on 1800 652 669. A paper copy of any updated
information will be available free on request. It is
NAB (whether in its individual capacity, as
recommended that you review any such additional Underwriter, as Sole Arranger, as provider of
material before making a decision whether to
any debt facilities or treasury services or in any
acquire Units. If there is any material adverse
other capacity) does not accept any responsibility
change, a supplementary product disclosure
for any information or errors contained in,
statement will be issued.
or any omission from, this PDS and has not
Pictures of properties in this PDS
separately verified the information contained in
All pictures of properties in this PDS are actual
this PDS and makes no representation, warranty
pictures of the Properties unless stated otherwise.
or undertaking, express or implied, as to the
accuracy or completeness or suitability of the
Defined terms
information contained in this PDS.
Certain terms used in this PDS have been defined
Investments in the Fund are subject to investment
and the definitions are set out in the Glossary of
and other risks, including possible delays in
this PDS. Currency amounts are in Australian
dollars.
payment or loss of capital invested.
The information contained in this PDS is not
Offer restrictions
financial product advice. This PDS has been
The Offer is only being made to persons in
prepared without reference to your investment
Australia and to a limited range of persons in
objectives, financial situation and particular
some other jurisdictions to whom offers may be
made without the need for compliance with any
needs. It is important you read this PDS in its
registration, licensing or disclosure requirements
entirety before making a decision whether
in the relevant jurisdiction.
to invest. If you are in any doubt, you should
consult your broker or financial or other
No action has been taken to register Units or
professional adviser.
otherwise permit a public offering of Units in any
Issuer and Responsible Entity
Sole Arranger
ACN: 101 802 046: AFSL 223339
Level 33
500 Bourke Street
Melbourne VIC 3000
Responsible Entity of Valad Opportunity No. 11
(ARSN: 108 693 876)
Level 9
1 Chifley Square
Sydney NSW 2000
Directors of the Issuer
Stephen Day (Chairman)
Peter Hurley
Trevor Gerber
Bob Seidler
Andrew Martin
Auditors
201 Sussex Street
Sydney NSW 1171
Registrar
Level 12
680 George Street
Sydney NSW 2000
precinct.com.au
Underwriter
Level 33
500 Bourke Street
Melbourne VIC 3000
Solicitors to the Issuer
Mallesons Stephen Jaques
Level 61
Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Grosvenor Place
225 George Street
Sydney NSW 2000
Information Line
NAB: 1800 652 669
www.nabmarkets.com/valad
VALAD OPPORTUNITY FUND NO. 11
VALAD
OPPORTUNITY
FUND NO. 11
ABN 76 101 802 046, ACN 101 802 046,
AFSL 223339 as Responsible Entity
for Valad Opportunity Fund No. 11
ARSN 108 693 876
An Offer to raise up to $27.294 million
at the Application Price of $1.01 per Unit
3 May 2007
Manager
www.vof.com.au
Valad Commercial Management
Limited, ABN 76 101 802 046,
ACN 101 802 046, AFSL 223339
Sole Arranger and Underwriter
ABN 12 004 044 937,
ACN 004 044 937, AFSL 230686

valad opportunity fund no. 11

Transcription

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