Contents · 2. Notice Realside 170 Pac Hwy Fund | Information Memorandum 3 This Information Memorandum (IM) is dated 13 August 2020 and is issued by Realside Asset Management Pty

Trustee – Realside Asset Management Pty LtdACN 634 575 714 | AFS License 517629

Information MemorandumRealside 170 Pac Hwy Fund

13 August 2020

Contents

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Notice 03

Introduction 04

Key Features 05

Management of the Fund 07

The Property 09

Financial Analysis 19

Details of the Offer 24

Risk 29

Fees and Costs 34

Taxation Information 37

Additional Information 39

Glossary 42

How to Invest 44

Realside 170 Pac Hwy Fund | Information Memorandum

2

Notice


3This Information Memorandum (IM) is dated 13 August 2020 and is issued by Realside Asset Management Pty Ltd ACN 634 575 714. (Trustee, we or us) AFS Licence number 517629, the trustee of the Realside 170 Pac Hwy Fund (Fund). The purpose of this IM is to provide information for prospective Investors to decide whether they wish to invest in the Fund.

ConfidentialityThis IM is confidential and is being provided to prospective Investors for them to consider investing in the Fund. Its use for any other purpose is not permitted. It may not be reproduced or redistributed, in whole or in part, and its contents may not be disclosed to any person.

No disclosure requiredThis IM is intended to provide potential Investors with information only and does not constitute a product disclosure statement or other disclosure document required by the Corporations Act 2001 (Cth) (Act). This IM has not been lodged with the Australian Securities and Investments Commission (ASIC) or any other government body. The Offer made under this IM is only available to persons who qualify as wholesale clients (as defined in section 761G(7) of the Act) or sophisticated investors (as defined in section 761GA of the Act) (collectively, Qualifying Investors). The Trustee will not issue Units in the Fund to a person unless it is satisfied that the person is a Qualifying Investor.

Foreign jurisdictionsThis IM does not constitute, and may not be used for the purpose of, an offer or solicitation in any jurisdiction other than Australia or in circumstances in which such offer or solicitation is not authorised. No recipient of this IM in any jurisdiction other than Australia may treat it as constituting an offer to acquire units in the Fund.In particular, this product has not been and will not be registered under the US Securities Act or the securities laws of any state of the United States and may not be offered, sold, delivered or transferred in the United States or to, or for the account of, any “US Person” (as defined in Regulation S under the US Securities Act). Neither this IM nor any Application Form or other material relating to this product may be distributed in the United States.

No responsibility for contents of documentTo the maximum extent permitted by law, neither the Trustee, nor any of its associates, related parties, directors, officers, employees, advisors (including financial, accounting and legal advisors) or representatives make any recommendation in relation to the Fund, or make any representation or warranty, express or implied, as to the accuracy, reliability or completeness of the information contained in this IM.

This IM does not purport to contain all the information that a prospective Investor may require in evaluating a possible investment in the Fund. This IM must be read in conjunction with the Fund’s Constitution, a copy of which is available (free of charge) by contacting the Trustee at [email protected]. To the extent there are any inconsistencies between the Constitution and this IM, the Constitution will prevail.

Not regulated by APRAThe Trustee is not authorised under the Banking Act 1959 (Cth) (Banking Act) and is not supervised by the Australian Prudential Regulation Authority, nor are investments in the Fund covered by the deposit or protection provisions in section 13A of the Banking Act.

Forward looking statementsThis IM includes forward looking statements that may contain the words “believe”, “intend”, “estimate”, “expect” and words of similar meaning. All statements other than statements of historical facts included in this IM, including, without limitation, those regarding the Fund’s financial position and business or investment strategy, plans and objectives are forward looking statements. Such forward looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Fund to be materially different from future results, performance or achievements expressed or implied by such forward looking statements.Any forward looking statements are based on numerous assumptions regarding the Fund’s operations and present and future business and investment strategies and the markets in which the Fund will operate in the future. These forward looking statements are made on the date of this IM. Accordingly, there can be no assurance that such statements, estimates or projections will be realised.

Independent advice recommendedProspective Investors are not to construe the contents of this IM as tax, legal or investment advice. The information contained in this IM is general information only and does not take into account your objectives, financial situations or needs. An investment in the Fund should be regarded as speculative and may not be appropriate for all persons or entities. You should seek appropriate professional advice and should conduct your own independent investigation and analysis regarding any information contained in this IM. You should rely on your own enquiries, in particular in obtaining your own legal, investment and tax advice in determining whether to invest in the Fund.

No guaranteeAn investment in the Fund is subject to investment risk, including the loss of income and capital invested. Neither the Trustee, nor any of their directors, officers, employees, advisors or representatives guarantee the rate of return or performance of the Fund, the meeting of the objectives of the Fund, nor do they guarantee the repayment of committed capital nor do they make any guarantees about the timing of repayment of committed capital, which may be significantly delayed.

Trustee limitation of LiabilityExcept in certain circumstances (including fraud, negligence or wilful default by the Trustee), the Trustee enters into transactions for the Fund in its capacity as trustee of the Fund only, not in its own capacity, and its liability in relation to those transactions is limited to the assets of the Fund.

Disclosure of InterestsThe Trustee, or its related entities may also acquire Units in the Fund on the same terms and with the same rights as other Investors in the Fund.

Updated informationThe information contained in this IM can change, and the IM may be updated or replaced from time to time. Unless the changed information is materially adverse to you, the Trustee may not always update or replace this IM to reflect the changed information. Updated information can be obtained by contacting the Trustee.

Glossary Certain capitalised words and expressions used in this IM are defined in the Glossary. All references to dollar amounts in this IM are to Australian Dollars (AUD), unless otherwise stated.

DirectoryTrusteeRealside Asset Management Pty Ltd ACN 634 575 714, AFSL 517629 Level 3, 28-34 O’Connell Street, Sydney NSW 2000 [email protected]

Fund Administrator Realside Services Pty Ltd ACN 634 572 517, Level 3, 28-34 O’Connell Street, Sydney NSW 2000 [email protected]

Introduction

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The Realside 170 Pac Hwy Fund has been established to acquire a 100% interest in a Sydney metropolitan freehold office building located on the fringe of the St Leonards office precinct.The Property is a 100% leased, substantially refurbished, office building with a weighted average lease expiry of approximately 3.9 years, diversified across multiple tenants. The property has 116 car bays which is an unusually high car bay ratio of 1 bay per 38 sqm of office area, excellent natural light from windows on three sides, and elevated outlooks including harbour and CBD views to the south.The St Leonards office market has been a strong performer in recent years, and notwithstanding COVID-19, is well placed to continue to perform well as a result of further office stock withdrawals to residential uses, the development of the new Sydney Metro St Leonards train station, and its close proximity to the Royal North Shore hospital precinct.The Property has a Development Approval to add an additional two storeys of office space. The potential development will add a further 1,670 sqm of office Net Lettable Area (NLA) to the building featuring floor to ceiling height glazing along each side of the offices providing excellent natural light and views. Notwithstanding any development is subject to further feasibility analysis post settlement, and subject to market conditions, it does represent exciting upside investment performance potential.With an initial Fund gearing level of 55% the Fund will be targeting an investor distribution of 7.5% (year 1) with a total IRR target of 10.6% over an anticipated 5 year initial investment term (excluding the development of any additional office floors).

Key Investment Highlights

$42m Purchase Price

7.5% Forecast Year 1

Cash Return

10.6% IRR % (5 years)

$23.55m Equity Raise

3.9 years WALE (by Income)

55% Initial Fund Gearing

Distributions Paid Quarterly

5 years Initial Investment Term

Development Upside

Diversified Tenant Profile

Key FeaturesThe table below is only a summary of the key features of an investment in the Fund. It is not intended to be exhaustive. You must read the whole of this IM to obtain more detailed information before making a decision to invest in the Fund.

About the Fund Section

Fund Realside 170 Pac Hwy Fund 4.1

Trustee Realside Asset Management Pty Ltd is the trustee of the Fund. 1.1

Investment Manager

Realside Property Pty Ltd is the Investment Manager of the Fund. 1.3

Investment strategy

The Fund intends to invest in 170 Pacific Highway, Greenwich, NSW (the Property).

See section 2 for information about the Property.

It is intended the acquisition of the Property will be funded by a combination of equity raised under the Offer from Investors through the issue of Units and borrowings from a financial institution(s).

2.3

Investment return objective

The Fund intends to acquire the Property and is targeting an income return to Investors of 7.5% p.a., or greater, and a total return (including both income and capital growth) of 10.6% p.a. (IRR), or greater, over a 5 year initial investment period.

Please note that the above investment return objective is not a forecast. It is merely an indication of what the Fund aims to achieve on the assumption that the investment markets in which the Fund is invested remain relatively stable through the anticipated investment term. The Fund may not be successful in meeting its objective, and like any investment there are risks associated with an investment in the Fund. See section 5 for further information about the specific risks associated with the Fund.

3 & 4.2

Who can invest? The Offer is only available to persons who qualify as wholesale clients (as defined in section 761G(7) of the Act) or sophisticated investors (as defined in section 761GA of the Act) (collectively, Qualifying Investors).

See section 4.3 for further information on Qualifying Investors.

4.3

Key dates Offer opens:

The date of this IM (i.e., 13 August 2020).

Offer Close Date:

4 September 2020 or the date the Minimum Offer Amount is raised.

Please note these dates are indicative only and are subject to change without notice. The Trustee reserves the right to extend the term of the Offer at its discretion.

4.4

Amount to be raised

The Minimum Offer Amount is $23.55 million, which will be used to fund the acquisition of the Property. The Target Offer Amount is $23.55 million. The Maximum Offer Amount is $25.00 million.

3.4 & 4.5

Units There will be one class of Units in the Fund, known as ordinary Units. 4.6

Continued

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About the Fund (continued) SectionIssue of Units For applications received and accepted by the Offer Close Date, it is intended

Units will be issued within five Business Days.4.7

Unit Prices Subscriptions for Units under this IM will be at $1.00 per unit. 4.8

Minimum investment amount

The minimum investment is $100,000 from a Qualifying Investor. 4.9

Expected investment term

The Fund is open-ended, however see Section 4 for more details on the Fund’s structure and term. An investment in the Fund should be viewed as a long-term investment.

See Section 4.10 for further information on the expected investment term of the Fund, including details of the Trustee’s exit strategy for investors.

4.10

Borrowings The Trustee will source debt funding for the acquisition of the Property. The Trustee may also obtain debt funding for other purposes, such as improving the Property.

The Fund will target an LVR of 55%, and will not intentionally permit an LVR of greater than 60%. The Minimum Offer Amount of $23.55 million represents an LVR of 55%.

See section 4.11 for further information.

4.11

Distributions It is expected distributions will be made during the Fund’s term, which can comprise income and/or capital amounts.

It is intended income distributions will be paid quarterly in arrears.

4.12

Withdrawals The Fund is illiquid and does not offer regular liquidity. It is intended that withdrawal opportunities will be offered by the Fund every five years via the Periodic Withdrawal Facility as set out in Section 4.13.

4.13

Risk Like any investment of this type, there are risks associated with investing in the Fund. Distributions are not guaranteed, nor are any capital returns.

For further information about the specific risks associated with the Fund, see section 5.

5

Fees and other costs

There are fees and expenses payable in relation to the management of the Fund. For information about fees and expenses, see section 6.

6

Tax Information Before investing in the Fund, you should obtain your own independent tax advice, which takes into account your own circumstances.

7

Reporting You will receive annual updates on the Fund performance and annual reports on any distributions paid to you. You will also receive annual tax statements to assist you in preparing your tax return.

8.2


6

1.1 About Realside Financial Group 08

1.2 The Trustee 08

1.3 The Investment Manager 08

1.4 The Administrator 08

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Management of the Fund1.1 About Realside Financial GroupThe Realside Financial Group (the Group) is an investment firm specialising in unlisted property, asset finance and structured equity. The Group combines the investment expertise of the principals developed over 20 years, and in excess of $2 billion in completed transactions, within institutional firms as well as family offices. The principals of the Group have been working together for many years and previously played key roles in the successful development of two multi-billion dollar investment firms.The Realside Financial Group of companies includes the Trustee, Investment Manager and Administrator.Further information on the Realside Financial Group can be found at www.realside.com.au.

1.2 The TrusteeRealside Asset Management Pty Ltd ACN 634 575 714 is the trustee of the fund.

1.3 The Investment ManagerThe Trustee has appointed Realside Property Pty Ltd ACN 634 585 210 as the Investment Manager (Investment Manager) of the Fund. The Investment Manager is responsible for the day to day management of the assets of the Fund. This includes pre acquisition due diligence, arrangement and management of the Funds debt funding, financial performance of the Fund and oversight of the asset manager.

1.4 The AdministratorThe Trustee has appointed Realside Services Pty Ltd ACN 634 572 517 as the Fund administrator (Administrator). The Administrator will provide a number of services to the Fund, including accounting, registry, compliance and general administration functions.

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2.1 The Property 10

2.1.1 Location 10

2.1.2 Physical Attributes 11

2.1.3 Valuation 12

2.1.4 Physical Condition 13

2.1.5 TenantProfile 14

2.1.6 Additional development potential 16

2.2 Market Commentary 17

2.3 Strategy 17

The

Prop

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The Property2.1 170 Pacific Highway, Greenwich, NSW

Legal description Lettable area Car Bays Site areaLot 1 in deposited plan 716649 4,402 sqm Single 96

Tandem 16

Visitor 4

Total 116

2,434 sqm

2.1.1 LocationThe Property comprises 170 Pacific Highway, Greenwich, within Lane Cove Council Local Government Area (LGA). Located on Sydney’s Lower North Shore, the site is approximately 700m from St Leonards train station and 5km north of Sydney CBD. The site is located in the south eastern corner of the LGA, with St Leonards town centre being the border between Lane Cove, Willoughby and North Sydney LGAs.The Site is locally described as Lot 1 in DP 716649 and has an area of approximately 2,434 sqm. Situated just north of Sydney CBD, St Leonards is Sydney’s sixth largest employment centre with over 27,000 working professionals based in the area. Identified by NSW State Government as

a priority precinct, the area will undergo major gentrification over the coming years, underpinned by its new metro station in 2024.Currently supported by the existing St Leonards train station, the suburb boasts a highly accessible and central location between the commercial hubs of Chatswood, North Sydney and Sydney CBD. Known for its thriving office market and world-class healthcare facilities, St Leonards also offers several elite schools, parks, retail and dining amenities.The Property is approximately 650m to the Royal North Shore Hospital. With the St Leonards/Crows Nest precinct planned to experience significant transformation in the future, 170 Pacific Highway has the potential to capitalise on the imminent growth of the area.

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2.1.2 Physical Attributes170 Pacific Highway is a five-storey freehold office building comprising 4 floors of office space over a basement car park originally constructed in 1986. Commanding a high-profile location along the Pacific Highway, the property’s façade features dark grey cladding with tall wraparound windows on each side. The building’s main entrance is located on the Pacific Highway, whilst rear lane vehicular access to the property’s at-grade and basement parking is available via Elcedo Lane.The building provides a NLA of approximately 4,402 sqm comprising ground floor retail lobby café with outdoor seating at the front of the building, ground floor accommodation occupied by a medical tenant, and four upper office floors.The property includes a total of 116 car spaces, a substantial amount for a building of this size, representing a car parking ratio of 1 space per 38 sqm of NLA.The property has undergone extensive refurbishment in recent years, with over $2,600,000 spent on capital expenditure since 2015. The refurbishments include:• Major lobby refurbishment• Repainting of the façade• Two new lifts installed (2016)• New security system• New end of trip facilities• Bathroom upgrades• On floor refurbishments

Furthermore, with the recent commencement of new leases in the building, each suite has undergone custom fitout works to provide high quality office space throughout the property.Office floor plates on Levels 1 to 4 are in the order of 1,017 to 1,099 sqm. Level 4 also provides a terrace area to the eastern and western alignments. Typical office accommodation provides commercial grade carpets, acoustic grid ceiling with recessed fluorescent tube lighting and fire inclusions. Windows typically extend from just below desk to ceiling height and there is natural light to three sides, with quite expansive views from upper levels to the west and partial Sydney CBD views to the south.The building has a 4.0 Star Energy Rating.

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2.1.3 ValuationAn independent valuer was engaged to complete a valuation of the Property.The valuation report confirms support for the contract purchase price of $42,000,000.

Value Comparison / Analysis

Capitalisation Result 42,889,606

DCF Result 41,890,249

Adopted Value 42,000,000

Initial yield 6.39%

Core market yield 6.09%

Terminal yield 6.25%

Rate $/sqm 9,597

Core Market Yield Comparison

$/m2 of NLA Comparison

IRR (10yr) Comparison

A copy of the valuation is available on request from the Trustee.

6%4%2%0%

170 Pacific Highway

120 Christie St, St Leonards

280 Pacific Hwy, Lindfield

12 Waterloo Rd, Macquarie Park

4–10 Bridge St, Pymble

34–36 Chandos St, St Leonards

110–112 Christie St, St Leonards

154 Pacific Hwy, St Leonards

Core Market Yield Comparison

$/m2 of NLA Comparison

$15k$10k$5k$0

170 Pacific Highway








IRR (10yr) Comparison

170 Pacific Highway








8%6%4%2%0%

When assessed against comparable sales, the acquisition of 170 Pacific Highway benchmarks favourably on core market yield, IRR (10 year) and capital rate per sqm comparisons.

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Capital expenditure forecastShort term

<1 yearMedium term

2 – 5 yearsLong term

6 – 10 yearsStructural / Building fabric nil $90,000 $100,000

External areas nil $125,000 $45,000

Mechanical nil nil nil

Electrical services nil $290,000 $45,000

Hydraulic services nil nil nil

Fire services $36,000 $85,000 nil

Lifts nil nil nil

Total $36,000 $590,000 $190,000

2.1.4 Physical ConditionA technical due diligence report was commissioned for the acquisition.The 10-year capital expenditure items noted as having a moderate or high likelihood of occurrence can be summarised as follows:

The total for the proposed 5 year investment term is $626,000. There is a further $595,500 identified as being either Insignificant or having a low probability of occurring and these amounts have not been specifically provisioned for in the financial model. The financial model has provision for c. $1,160,000 of capital expenditure across the 5 year forecast.

The Property is free of aluminium composite panels of a combustible nature.The valuation has provided an Insurance Reinstatement Cost estimate. It assessed the reinstatement cost at $35,000,000 (excluding GST). Note that this number excludes the value of the Land. A copy of the technical due diligence report is available on request from the Trustee.

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2.1.5 Tenant ProfileThe Property is 100% occupied with a diverse tenant mix.

Mainbrace Constructionshttps://www.mainbrace.com.au/Mainbrace Constructions is Australia’s leading and most experienced retail builder. With over 30 years of experience the company has completed over 1,500 projects with a value of over $3.5 billion. Currently employing over 200 staff, the company’s clients range from small businesses to large corporates, including virtually all major retailers in Australia.

Soho Floridishttps://www.sfihealth.com/Soho Flordis International, or SFI, is a global premium natural healthcare company with over 200 years of experience. Founded in 1812 as an everyday healthcare brand, Potter’s, the SFI family has since expanded to include several other brands – Flordis, Klaire Labs, Ginsana, Equazen, ProThera and Complementary Prescriptions. Each brand offers premium quality natural healthcare products used by healthcare professionals and consumers around the world.

Essence Grouphttps://essencegp.com.au/With over 15 years of experience, Essence Group are an Australian owned full service, contract manufacturer, distributor and innovator of industrial goods, nutraceuticals and infant nutrition. The company has worked with Australia’s biggest brands and private label companies to create a wide variety of products delivered locally and internationally.Essence Group has a best-in-class facility based in Nowra for manufacturing and high-speed industrial packaging and currently employs over 180 personnel.

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Below provide further details of the tenants at the Property:

Tenant Location Area(sqm)

%NLA

Expiry

Mainbrace Constructions Part Level 3 & Level 4 1,449 33% 31 May 2022

Soho Flordis Level 2 1,099 25% 30 June 2024

Essence Group Part Level 3 613 14% 31 October 2025

Invisalign Australia Part Level 1 598 14% 31 March 2024

Vieira Lech Lopes Partners Part Level 1 378 8% 31 August 2029

Ultrasound Care Australia Part Ground 254 6% 14 July 2027

Piccolo Me Part Ground 10 <1% 30 September 2028

Vacant 0 0%

Total $36,000 4,401 100%

100%Leased

Tenant Composition by NLA

Mainbrace Constructions

Soho Flordis

Essence Group

Invisalign Australia

Vieira Lech Lopes Partners

Ultrasound Care Australia

Piccolo Me

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2.1.6 Additional development potentialThe Property has a Development Approval to add an additional two storeys of office space.The proposed development will add a further 1,670 sqm of office NLA to the building, accessible by extending the existing fire stairs and lifts. Parts of the current roof will be demolished or altered, including the relocation of the cooling towers to the new Level 5 and a new mechanical plant platform on Level 6.The new office floors have a complete open plan layout with both male and female amenities. High floor to ceiling height glazing along each side of the offices provide strong natural light and views of St Leonards, Sydney CBD and Sydney Harbour. Level 6 features a large outdoor terrace on the south side of the building, whilst Level 5 includes terraces on both the south and north side facing the Pacific Highway.Preliminary construction cost estimates range between $7.50 million – $8.50 million to complete the development. Further work on the feasibility and constructability of the additional floors will occur post settlement and will be subject to market conditions.

The cost to complete the additional floors has not been provided for in the financial modelling. Should a decision be made to proceed with the development, it will be funded by a combination of additional debt, additional equity or a combination of both.The development:• Is subject to a detailed feasibility assessment

post settlement.• May or may not proceed. • May be funded by debt or equity or a

combination of both.If Investors do not participate in any subsequent equity raise your investment will be diluted. If an investor does not wish to be exposed to development risk, you should carefully consider your participation in this investment.The following renders graphically depict the potential development of the proposed additional two storeys.

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2.2 Market CommentaryThe St Leonards/Crows Nest office market comprises some 309,627 sqm of accommodation according to January 2020 figures from the Property Council of Australia. This is a net reduction in overall scale of some 15%, compared to 366,200 sqm 10 years ago as the market has seen a transition to a mixed use precinct with withdrawal of older office stock for residential/mixed use redevelopment.The market comprises 33% A-grade stock and 21% B-grade accommodation. The relatively high proportion of C and D-grade stock (46% of the St Leonards/Crows Nest office market) is representative of the relatively older age of the stock and the trend over recent years for maintenance and capital expenditure to be curtailed as assets are held for future residential/mixed use redevelopment in areas where the town planning controls permit.Over the past few years the St Leonards office market has experienced substantial and steady capital growth primarily driven by withdrawals for residential conversion and compulsory government acquisitions as well as a subdued supply pipeline. As a result, St Leonards has seen sharpening vacancy rates and greater demand for office space as the precinct’s draft master plan comes to fruition.Over the five years to January 2020, a total of 43,713 sqm, has been removed from the market compared to 6,406 sqm of new or refurbished supply entering the market over the period. A trend that is expected to continue over the coming years, with a number of existing buildings expected to be permanently withdrawn putting further downward pressure on supply. The recent boom in the Sydney CBD office market has resulted in an influx of companies looking for alternative, more affordable locations to operate their business. Whilst it is too early to identify any firm trends, the transition to city fringe suburbs has the potential to escalate further due to the current environment surrounding COVID-19, with businesses focusing on economic office cost and access to car parking. As a result, destinations such as St Leonards, on balance, should become increasingly popular due to their direct connectivity to Sydney CBD, modest suburban rents and already established commercial markets. St Leonards also attracts professional services, pharmaceuticals and medical tenants due to its proximity to the hospital.

There are two Development Approved sites at Gore Hill Technology Park (219-247 Pacific Hwy), for a combined GFA of circa 70,000 sqm. Both are purpose built data centres currently under construction (iseek with 14,000 sqm and Next DC with 56,000 sqm). At the Royal North Shore Hospital precinct, following an expression of interest the NSW Government has decided to retain ownership of the Southern Campus to accommodate the NSW Ministry of Health and other health organisations. Construction on site is reaching completion in Q3 2020. NSW Health will occupy the building together with eHealth and HealthShare NSW.The vacancy rate in the St Leonards/Crows Nest stands at 7.0% as at January 2020 from 6.1% in January 2019. More broadly, vacancy rates were at a 30 year low across key office markets, with contiguous prime space becoming increasingly limited.The outlook during and post COVID-19 will depend on the occupier demand, given both employment growth has contracted and business confidence has tapered we are expecting this sentiment to remain until COVID-19 restrictions begin to ease.

2.3 StrategyThe positive attributes of the Property are:• Its location in the established inner metropolitan

office location of St Leonards;• Proximity to strategic transport links;• A diversified tenant mix with a WALE of 3.9

years as at 1 September 2020;• Close proximity to Royal North Shore Hospital

with a presence of medical tenants in this precinct;

• Good levels of natural light throughout the office accommodation with windows to three side and elevated outlooks including harbour views to the south and partial south-easterly Sydney CBD views from upper levels;

• Car parking provision with a strong ratio of 1 space per 38 sqm of NLA;

• Development consent has been granted for two additional office floors;

• Large 2,434 sqm site with dual street access; and

• A value bracket accessible to a large range of buyers including private investors and syndicates.

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The asset management strategy will broadly consist of:• Ongoing tenant retention as respective

tenancies near expiry• Continue to invest in capital improvements and

refurbishment to maintain the high standard of presentation of the Property

• Conduct a detailed feasibility of the development of the two additional floors of office accommodation to maximise the value of the Property.

• Explore ways to improve the Property’s energy rating to above 4 stars.

To assist in the implementation of the asset management strategy, the Trustee has appointed Halesmith Property in the role of asset consultant.

Halesmith Property is a Sydney based boutique real estate advisory and investment business established by Richard Horne, focused on connecting people, asset management, strategy, pinpointing opportunities and delivering outcomes.Richard has 30 years of property experience in the UK, Australia and New Zealand where he held key executive roles as Managing Director of New Zealand, National Head Of Retail at CBRE, and Managing Director of NSW at Knight Frank from 2011 – 2019. Richard has excellent experience in all major property sectors, and enjoys many strong relationships in the market.

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3.1 Summary 20

3.2 Projection 20

3.3 Projectedcashflowassumptions 22

3.4 Sensitivity Analysis 23

Fina

ncial

Ana

lysis

03

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Financial Analysis3.1 SummaryThe following is based on the acquisition of the Property and the Target Offer Amount being raised. This information is subject to change, and in particular in the event subscriptions are received other than at the Target Offer Amount, ie. at the Minimum Offer Amount, the Maximum Offer Amount or in between these amounts.

Purchase Price 170 Pacific Highway, Greenwich $42,000,000Stamp Duty $2,878,782Due diligence and Bank costs $133,257Acquisition fee $756,000Asset consultant fee $147,000Owners Contingency $734,961Total $46,650,000Equity (Minimum Offer Amount) $23,550,000Debt $23,100,000Total $46,650,000

Balance Sheet 170 Pacific Highway, Greenwich $42,000,000Cash $734,961Total Assets $42,734,961Less Debt (55% LVR) $23,100,000

Net Tangible Assets (NTA) $19,634,961Units 23,550,000NTA Per Unit* $0.83

3.2 ProjectionThis section contains important financial information. These projections have been prepared as a guide to the financial performance of the Fund. Actual returns from the Fund may be subject to variations, many of which are outside the control of the Trustee, and which may differ materially from these projections. The projections are subject to change, and in particular in the event subscriptions are received below or above beyond the Target Offer Amount. The cashflow is based on assumptions as specified, and if the assumptions vary, then so will the cashflow. The projections should be read in conjunction with the assumptions set out in Section 3.3, the sensitivity analysis set out in Section 3.4, the risks set out in Section 5, and other information detailed in this IM.The Trustee has assumed that tenants will generally be retained during the forecast period. If tenants vacate, and are not replaced in a timely manner, the return projections will be negatively impacted.We suggest independent advice is sought as the assumptions, the tax implications, capital gains, and other issues relating to the Fund.

* For the purpose of Unit Pricing, acquisition and borrowing costs will be capitalised and amortised over a 60 and 36 month period, respectively.

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21

3.2 Projection (continued)

Year commencing September 2020 2021 2022 2023 2024

Rental Cash Flows

Office rent $2,145,268 $2,223,793 $2,304,440 $2,387,028 $2,472,656

Retail rent 26,953 28,031 29,153 30,319 31,532

Carparking rent 503,886 524,041 545,003 566,803 589,475

Other rent (Naming, Storage, Telco) 50,619 52,644 54,750 56,939 59,217

Interest income 955 1,244 791 940 658

Cash Flow $2,727,681 $2,829,753 $2,934,136 $3,042,030 $3,153,537

Investment Management Fee 0.50% $(210,000) $(226,281) $(234,668) $(243,287) $(252,230)

Halesmith Proprty Fees 0.15% (63,000) (67,884) (70,400) (72,986) (75,669)

Future incentive allowances $(858,170) (171,634) (171,634) (171,634) (171,634) (171,634)

Capex (425,000) (75,000) (75,000) (75,000) (50,000) (150,000)

Net Cash Flow before Interest $2,208,047 $2,288,954 $2,382,434 $2,504,122 $2,504,004

Base rate 0.20% 0.45% 0.45% 0.75% 0.75%

Margin 1.70% 1.70% 1.70% 1.70% 1.70%

Total interest rate 1.90% 2.15% 2.15% 2.45% 2.45%

Less interest paid (438,900) (496,650) (507,400) (578,200) (578,200)

Net Cashflow After Interest $1,769,147 $1,792,304 $1,875,034 $1,925,922 $1,925,804

Return on Equity Average 7.9% 7.5% 7.6% 8.0% 8.2% 8.2%

End Value building @ yield 6.25% $52,301,924

Selling costs 0.80% (418,415)

Incentive adjustments (531,722)

Debt repayment $(23,600,000)

NPV Calculations

Cash Flows for IRR calculations $(23,550,000) $1,769,147 $1,792,304 $1,875,034 $1,925,922 $29,677,591

Pre fee IRR for Investor 10.7%

Post fee IRR for Investor 10.6%

Tax Deferred (estimate)

Interest Cover Ratio (forecast) 5.03 4.61 4.70 4.33 4.33

Loan Balance $23,100,000 $23,100,000 $23,600,000 $23,600,000 $23,600,000

Additional Debt (500,000) $500,000

Yield 6.43% 6.25% 6.25% 6.25% 6.25%

Valuation $42,000,000 $45,256,152 $46,933,530 $48,657,434 $50,446,074

Net office rent /sqm $488 $506 $525 $543 $563

Capital rate per metre $9,540 $10,280 $10,661 $11,053 $11,459

LVR 55.0% 51% 51% 49% 47%

* This cashflow has been prepared as a guide to the financial performance of the property. The cashflow is based on certain assumptions as specified and if the assumptions vary, so will the cashflow. We suggest independent advice is sought as to the assumptions, the tax implications of depreciation, capital gains, and other issues relating to this property.


3.3 Projected cashflow assumptions

Property purchase: The purchase price of the Property is $42,000,000 and settlement will be completed on 25 September 2020. As it has been assumed that the Going Concern Provisions of the GST Act will be applied, no allowance has been made for a refund of GST.

Stamp Duty:$2,878,782, calculated in accordance with the Office of State Revenue scale, based upon the combined contracted purchase price of $42,000,000.

Acquisition costs: An allowance that will be attributed to costs associated with the acquisition and settlement of the Property, including preparation of the IM and the Constitution, due diligence costs, the acquisition fee payable to the Trustee, plus the cost of obtaining finance including valuation of the Property.

Net rental income: Current net rental income is based the existing leases. The projections assume tenants exercise any options available to them and to the extent those options are subject to market rental reviews, then future rentals have been based on the Trustee’s forecast of future market conditions. If an existing tenant does not take up its option, then any delay in finding suitable tenants at the projected rents will affect the performance of the investment.

Interest costs: Indicative offers for debt funding indicate an overall variable interest rate of 1.9% (0.20% plus 1.7% margin). This is based on a three year facility and 55% LVR. Actual interest rate strategies and costs may vary between now and settlement, and may also vary throughout the Fund’s investment term. Interest rates used for future years represent the Trustee’s forecast of rate movements in future years. Actual interest rates may be higher or lower than the Trustee’s directors forecast during the investment period. The Trustee may choose to fix the interest rate on any loan facilities, although it is not obliged to do so. The forecast assumes that debt covenants are not breached and the rights of the financier are not exercised. The loan is to be a non-recourse loan. There will be no recourse to Investors. A first ranking mortgage will be registered over the Property. It has been assumed by the Trustee that the debt facility can be refinanced once the initial facility expires.

Owner’s Contingency: At settlement an Owner’s Contingency account will be established in the name of the Trustee with an initial deposit of approximately $734,961 plus a further $425,000 forecast diverted from cash flow during the investment term. These funds will be applied to fund items such as capital works, leasing fees, or investor distributions. Any surplus funds in the Owner’s Contingency at the end of the Fund’s term will be returned to Investors.

Incentives: The Vendor is responsible for any historic unexpired incentives in the form of rental abatement and will be adjusted in the Purchaser’s favour at settlement. The Trustee has made an allowance of $1,889,892 for additional incentives to sitting tenants during the 5-year term of the projections.

Downtime: The Trustee has assumed that tenants will generally be retained during the forecast period. If tenants vacate, and are not replaced in a timely manner, the return projections will be negatively impacted.

Building allowances & depreciation: Income Tax deductions for 2.5% building allowance and plant and equipment depreciation will be claimed in respect of the Property.

Selling yield: The projections assume the Property can be sold on a passing yield of 6.25% after five years. The Trustee believes the Property’s quality improvements, location and future development of the area will support a capitalisation rate of 6.25%. An analysis of the impact of a change in the selling yield is detailed in Section 3.4.

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3.4 Sensitivity AnalysisThe projections are influenced by the amount of subscriptions received raised as follows:

The projections are influenced by changes to the selling yield as follows:

Equity Raised Amount Debt (LVR)

Year 1 return

Average return (5 years)

IRR (5 years)

Target (Minimum) Investment Amount $23,500,000 55.0% 7.5% 7.9% 10.6%

Maximum Investment Amount $25,000,000 51.5% 7.2% 7.6% 10.2%

Selling yield Sale value IRR (5 years) 6.00% $54,480,000 11.7%

6.25% $52,300,000 10.6%

6.50% $50,300,000 9.4%

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4.1 The structure of the Fund 25

4.2 Investment return objective 25

4.3 Qualifying Investors 25

4.4 Key dates 26

4.5 Amount to be raised 26

4.6 Unit 26

4.7 Issue of units 26

4.8 Unit Prices 26

4.9 Minimum investment amount 26

4.10 Expected investment term 26

4.11 Borrowings 27

4.12 Distributions 27

4.13 Withdrawals 27

4.14 How to invest 27

04

Deta

ils o

f the

Offe

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4.1 The structure of the FundThe Fund is an Australian unit trust. Unit trusts are vehicles which enable investors to pool their money with that of other investors. The pooling, amongst other reasons, enables you to invest in markets that may otherwise be difficult to access.The Fund is structured as an unregistered managed investment scheme under the Act. It is an unlisted scheme.Money invested in the Fund will purchase a number of Units which represents your holding in the Fund. Each Unit in the Fund confers an equal and proportionate beneficial interest in the net assets of the Fund. No Unit will give you an interest in any particular part of the Fund’s assets or investments, or an entitlement to exercise any right or power in respect of any such asset or investment, or an entitlement to participate in the management or operation of the Fund (other than through Investor meetings).The working of the Fund is regulated by its Constitution and the general law of Australia. The Constitution sets out the conditions under which the Fund is to operate, the rights and liabilities of Investors, and the rights, powers, responsibilities and duties of the Trustee. Investors are bound by the provisions of the Fund’s Constitution.The principal rights of an Investor in the Fund are to:a) Share in the Fund’s distributable income;b) Attend and vote at Investor meetings andc) Share in the distribution of assets if the Fund

is wound up.The Trustee, as trustee of the Fund, will own all of the units in a sub-trust, the trustee of which will acquire the Property (Sub Trust). The acquisition of the Property will be funded by a combination of equity raised under the Offer from Investors through the issue of Units and borrowings from a financial institution(s).

4.2 Investment return objectiveThe Fund intends to acquire the Property and is targeting an income return to Investors of 7.5% p.a., or greater, and a total return (including both income and capital growth) of 10.6% p.a. (IRR), or greater, over a 5 year investment period based on the Target Offer Amount.Please note that the above investment return objective is not a forecast. It is merely a projection and are subject to significant risks as set out in Section 5. Refer to Section 3 for the detailed projections and the key assumptions upon which those are based.

4.3 Qualifying InvestorsThe Offer is only available to persons who qualify as wholesale clients (as defined in section 761G(7) of the Act) or sophisticated investors (as defined in section 761GA of the Act) (collectively, Qualifying Investors). A Qualifying Investor is an Investor who:a) invests $500,000 or more in the Fund;b) provides a certificate from a qualified

accountant (substantially in the form attached to the Application Form) that states the Investor has net assets of at least $2.5 million or has a gross income for each of the last two financial years of at least $250,000; or

c) is a professional investor (including the holder of an Australian financial services licence, a person who controls more than $10 million, or a person that is a listed entity or a related body corporate of a listed entity).

The Trustee will not issue Units to a person unless it is satisfied that the person is a Qualifying Investor.

Details oftheOffer

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4.4 Key dates

Offer Opens:The date of this IM (i.e., 13 August 2020).

Offer Close Date:4 September 2020 or the date the Minimum Offer Amount is raised.Please note these dates are indicative only and are subject to change without notice. The Trustee reserves the right to extend the term of the Offer at its discretion.

4.5 Amount to be raisedThe Target Offer Amount is $23,550,000, which will be used to fund the acquisition of the Property.The Minimum Offer Amount is also $23,550,000. If the Minimum Offer Amount is not raised, then the Trustee may not proceed with the Offer. If the Offer does not proceed, then the Trustee will return Investors’ Application Money without any interest earned (less any tax or bank fees paid). Only subscriptions at or above the Minimum Offer Amount will be accepted. The Maximum Offer Amount is $25,000,000.

4.6 UnitsAs of the date of this IM, there will be one class of Units in the Fund, known as ordinary Units.The Trustee may in its absolute discretion, issue new classes of Units at any time. Different classes of Units may have different terms and rights attached such as different fees and investment amounts.

4.7 Issue of unitsFor applications received and accepted by the Offer Close Date, it is intended Units will be issued within five Business Days of this date. The Trustee may refuse to accept an Investor’s application in its absolute discretion, including if the Trustee does not receive the Application Money in cleared funds and/or is not satisfied that it has received all relevant information required to process the Application Form.

4.8. Unit PricesSubscriptions for Units under this IM will be at $1.00 per unit. Investors should contact the Trustee to confirm the Unit price.

4.9. Minimum investment amountThe minimum initial investment is $100,000 from a Qualifying Investor.Following the minimum initial investment, Qualifying Investors may invest additional funds in the Fund in multiples of $50,000.

4.10 Expected investment termAn investment in the Fund should be viewed as a long-term investment. The Fund’s Initial Term is expected to be 5 years from the date Units are first issued to an Investor under this IM (Allotment Date). However, Investors should note the Fund may be wound up earlier, for example if the Trustee determines the Property should be sold prior to the expiry of the Initial Term. If the Fund has not been wound up earlier, then before the expiry of the Initial Term the Trustee will call a meeting of Investors at which Investors will have the opportunity to vote on whether or not the Fund should continue for a further term beyond the Initial Term. The Trustee will assess and recommend what it believes the length of any extension should be (for example, a further five years) taking into account the performance of the Fund and the Trustee’s assessment of the exit strategies available to the Fund. An ordinary resolution of Investors is required to extend the term of the Fund. This means at least 50 percent of the votes cast by Investors must be in favour of the extension for it to proceed. At the end of each extended term the Trustee may (at its discretion) call a meeting of Investors to vote on a resolution to extend the term for a further term.If Investors do not vote in favour of extending the term of the Fund, then the Fund will be wound up with the Trustee completing an orderly sale of the Fund’s investments.The time required to maximise the sale price of the Fund’s investments and complete an orderly winding up of the Fund may mean that while the winding up process will have commenced, the Fund may not actually be wound up until after the final day of the Initial Term (or an extended term as the case may be).

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4.11 BorrowingsThe Trustee will source debt funding for the acquisition of the Property. The Trustee may also obtain debt funding for other purposes, such as improving the Property. An indicative offer for debt funding has been received from an Australian Bank in respect of the Property.Subject to the Target Offer Amount of $23,550,000 being raised, the initial debt funding for the acquisition of the Property will be $23,100,000, which is 55.0% of the contract price. All debt funding will be non-recourse to Investors and will be secured over the Property. It is intended borrowings will take place at the Sub Trust level. If the Maximum Offer amount is raised, the LVR will be 52.6%. The Fund will not intentionally permit an LVR of greater than 60.0%. The LVR might increase if, for example, there is a fall in the assessed market value of the Property, or the Trustee in its discretion borrows additional money to fund capital works or tenant incentives.

4.12 DistributionsAs an Investor and holder of Units you are entitled to participate in income generated by the Fund’s assets. It is expected distributions will be made during the Fund’s term, which can comprise income and/or capital amounts. Subject to leasing and the general performance of the Fund, income distributions may be paid quarterly in arrears. Distributions will be paid into your nominated bank account.Distributions are at the discretion of the Trustee and there is no guarantee distributions will be paid.

4.13 WithdrawalsThe Fund is expected to be illiquid, with no right to withdraw other than through the Periodic Withdrawal Facility described in this section. The Trustee may at its discretion offer or allow withdrawals other than through the Periodic Withdrawal Facilities, but it is under no obligation to do so. The Fund may also facilitate Investors selling or transferring their Units.

The Fund will offer a Periodic Withdrawal Facility (PWF) as follows:• The first PWF will open on the fifth anniversary

of the commencement of the Fund, unless the Trustee exercises its discretion to postpone the opening for up to two years. The Trustee will notify Investors when the PWF opens.

• The PWF will remain open for a period of three months.

• Prior to announcing the PWF is open, the Trustee will obtain an independent valuation of the Property within the 3 months prior to a PWF and will use the valuation to calculate the withdrawal price payable on redemption of Units under the PWF.

• Investors will able to request a withdrawal of some or all of their Units during the PWF by submitting a withdrawal request to the Trustee (Periodic Withdrawal Request).

• The Trustee will have 12 months from the closing of the Periodic Withdrawal Facility to satisfy any Periodic Withdrawal Request.

• The Trustee expects subsequent PWFs will open every five years thereafter, subject to postponement of up to two years by the Trustee (in its discretion), and following the sale of one or more, but not all of, the Property.

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The Trustee may determine any matters incidental and procedural in relation to a Periodic Withdrawal Facility, including the procedures relating to submitting a Periodic Withdrawal Request (including the withdrawal offer period within which a Periodic Withdrawal Request must be submitted);• The Fund will endeavour to satisfy all

withdrawal requests from available funds or new applications as soon as reasonably practical. Available funds may also include surplus cash, funds from increasing debt facilities up to the Fund’s target gearing level or funds received from the disposal of Property.

• If the Trustee is unable to satisfy a Periodic Withdrawal Request within 12 months from the close of the PWF, then the Trustee may (in its discretion):– dispose of sufficient assets of the Fund,

including one or more Property, to satisfy the Periodic Withdrawal Request; or

– dispose of all of the Fund’s assets in an orderly manner and wind up the Fund.

• If the Trustee elects to sell one or more, but not all of, the Property, then the Trustee will inform Investors and allow all Investors the opportunity to reconsider the position and submit a withdrawal request under the PWF.

• Where the Trustee disposes of all of the Property and winds up the Fund, the disposal of the Property may occur over a period of up to two years, or such longer period as the Trustee determines is necessary.

4.14 How to investTo invest in the Fund you must complete the Fund’s Application Form which is available from the Trustee. The Application Form should be completed in accordance with section 10 of this IM.

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Risk

05

5.1 General investment risk 30

5.2 Projection risk 30

5.3 Property market risk 30

5.4 Loss of tenant risk 30

5.5 Leverage risk 31

5.6 Interest rate risk 31

5.7 Refinancerisk 31

5.8 Outgoings risk 31

5.9 Destruction or damage risk 31

5.10 Owner’s Contingency risk 31

5.11 Unexpected capital expenditure risk 31

5.12 Expert risk 31

5.13 Illiquid investment risk 32

5.14 General market risk 32

5.15 MinimumOfferAmountrisk 32

5.16 Regulatory risk 32

5.17 Legal and counterparty risk 32

5.18 Management risk 32

5.19 Performance risk 32

5.20 Taxation risk 32

5.21 Property Development Risk 33

5.22 General economic risks 33

5.23 COVID-19 risk 33

29


RiskLike any investment, there are risks associated with investing in the Fund. There are a number of risk factors that could affect the performance of the Fund and the repayment of an Investor’s capital. Many risk factors fall outside of the Trustee’s control and cannot be completely mitigated.The following is a non-exhaustive list of the main risks associated with investment in the Fund. Investors should consider and weigh them up carefully and make their own assessment as to whether they are comfortable with them.

5.1 General investment riskAn investment in the Fund is subject to investment risk, including the loss of income and capital. The Trustee does not guarantee the performance of the Fund or return of capital.

5.2 Projection riskThis IM contains projections based on many factors beyond the control of the Trustee. The projection assumptions are based on the following external information:a) Likely rental and leasing rates and conditions,

incentive levels and capital values in the St Leonards and broader office markets.

b) Likely building costs and building cost escalation.

c) Likely future interest rate and financing costs from debt financiers.

5.3 Property market riskThe value of any investment in real property is determined by the market at any particular point in time. History has shown that real estate values fluctuate. An investment in the Fund may therefore be adversely influenced by factors including:a) A downturn in the property market in general.b) A downturn in the Australian economy.c) A downturn in the property industry segment.

5.4 Loss of tenant riskThe loss of any tenant that is not replaced within a timely manner has the potential to have a material impact on the performance of this investment. As any future vacancies arise, it is assumed that replacement tenants are found in a timely manner. A delay in finding suitable tenants will affect the performance of the investment.The Fund’s target returns assume existing tenants continue to meet their obligations under their leases. Failure by one or more tenants to do so could result in a reduction to the distributions available to you, or in extreme circumstances, a failure by the Fund to meet its interest obligations to lenders. If an existing tenant does not exercise their option or renew their lease, then a vacancy may arise and the Fund could incur costs in releasing the premises such as contributions to an incoming tenant fit-out, rent free or other incentive payments. This could diminish the income available to the Fund for distribution.There is no guarantee that any current tenants will renew their lease when they expire. Any vacancy will diminish the income available to the Fund for distribution, and if a vacancy exists on the sale of a Property this will impact on the return to Investors as the sale price will likely be reduced.

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5.5 Leverage riskThe Trustee will source debt funding for the acquisition of the Property. The Trustee may also obtain debt funding for other purposes, such as improving the Property. A fall in the value of a Property or the net income derived from a Property could result in a breach of a borrowing condition. If there is a default of the debt facility, then the financier may enforce its security against the Fund, amongst other things, sell the Property to recover any amounts owing.The Trustee is in the process of obtaining a debt facility described in respect of the Property. An indicative offer for debt funding has been received from an Australian Bank in respect of the Property. However, until formal documents are entered into, there is a risk that debt may not be obtained on the terms contemplated by the indicative offer, or at all.The financier will impose lending covenants that will include, amongst other things, a LVR and interest cover ratios. In the event of a breach of any covenant, that is not remedied, the financier will have the right to take certain measures which may include, but not be limited to, withholding income from the Fund, or in the most serious instances, the forced sale of the Property.

5.6 Interest rate riskThe forecast interest rate in the project feasibility cash flow is 1.90% for the first year. Assumptions regarding interest rates in future years are based on the Trustee’s best estimates as shown in the projections.However, interest rates may rise or fall over the duration of the Fund’s term. Any increase in interest rates will reduce the funds available to distribute to Investors. Conversely, any decrease in interest rates will increase the funds available to distribute to Investors.

5.7 Refinance riskThe proposed debt facility in respect of the Property is for a term of three years. Upon the expiry of the debt facility, the financier has no obligation to roll over the debt facility. Refinancing will be required at that time and there is no certainty that debt funding to replace the proposed debt facility at the end of the term will be obtained or will be obtained on comparable terms. This may lead to increased interest costs for the Fund and therefore it may have a negative impact on Investors’ returns.

5.8 Outgoings riskIf outgoings which cannot be recovered from tenants under their leases are greater than those anticipated, then there will be an adverse impact on the Fund’s financial performance. Conversely, if outgoings are less than those anticipated, then there may be a positive impact on the Fund’s financial performance

5.9 Destruction or damage riskWhile the Fund owns the Property, the Trustee will put in place the normal commercial insurance policies to cover damage or destruction due to fire, theft, vandalism or other commercially viable insurable events. However, in the event of damage or destruction, there is likely to be consequential loss of income and expenses incurred.

5.10 Owner’s Contingency riskThe Trustee will establish an Owners’ Contingency for capital expenditure, tenant incentives and any unforeseen expenses. In the event the account is exhausted, the Trustee may be required to reduce income distributions to Investors or require a capital contribution from Investors to provide for any shortfall in recurring expenses (e.g. interest payments).

5.11 Unexpected capital expenditure riskIn the event of unexpected capital expenditure the Trustee will use cash reserves from the Owner’s Contingency. Should expenditure be greater than the amount held in cash reserves, the Trustee may borrow against the unencumbered equity of the Property.

5.12 Expert riskCertain assumptions have been based on advice obtained from independent experts. While the Trustee believes it is reasonable to rely on those experts, there is a risk that those assumptions may prove incorrect if, for example, a technical property report fails to identify the need for capital works.

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5.13 Illiquid investment risk The Fund’s underlying investments are real property assets, which are by their nature illiquid. It may be difficult for the Trustee to dispose of the Property at the end of the Fund term in a timely manner at its optimal sale price. If it becomes necessary for the Fund to dispose of its interest in the Property for any reason, including to lower gearing or due to the term of the Fund not being extended, there is a risk that the Fund may not be able to realise its interest in the Property in a timely manner or at an optimal sale price. This may affect the Trustee’s ability to return capital to Investors and may reduce the NTA per Unit.Additionally, there are no rights to withdraw your investment in the Fund or to require the Trustee to repurchase your investment. In addition, there will not be any established secondary market for Units. However, Investors may be able to transfer their Units to another person, subject to the approval of the Trustee at its discretion.

5.14 General market riskInvestment returns from the Fund are affected by general market conditions and may decline over short or extended periods due to market sentiment, economic, technological, legal, social and/or political factors. Factors that influence markets generally can include business confidence and government and central bank policies including the level and direction of interest rates, natural disasters and man-made disasters beyond the control of the Trustee.

5.15 Minimum Offer Amount riskIf the Minimum Offer Amount is not achieved, then the Trustee may not proceed with the Offer. If the Offer does not proceed, the Trustee will return Investors’ Application Money without any interest earned (less any tax or bank fees paid).

5.16 Regulatory risk The Fund’s operations may be negatively impacted by changes to government policies, regulations and taxation laws.

5.17 Legal and counterparty riskThe Fund may, in the ordinary course of business, be involved in possible litigation and disputes, for example, tenancy disputes, environmental and occupational health and safety claims, industrial disputes and any legal claims or third party claims.A material or costly dispute or litigation may affect the value of the assets or the expected income of the Fund. The Fund has entered into, and may in the future enter into, legal documents and contracts in relation to numerous aspects of the Fund’s operation, for example, property management arrangements, custody arrangements, debt financing arrangements, property development arrangements and tenancy arrangements. The Fund may be adversely affected where a party fails to perform under these agreements.

5.18 Management risk The Trustee is responsible for managing the Fund’s investments on a day to day basis. If it fails to do so effectively, then this could negatively affect the Fund’s performance.In particular, there is a risk the Trustee may fail to anticipate movements in the property market, fail to manage the investment risks appropriately or fail to properly execute the Fund’s investment strategy. These factors could have an adverse impact on the financial position and performance of the Fund.

5.19 Performance riskThere is a risk that the Trustee will not achieve the performance objectives of the Fund or produce returns that compare favourably against its peers. Many factors can negatively impact the ability to generate acceptable returns.

5.20 Taxation riskThe returns to Investors may be affected by changes to taxation legislation. Changes to taxation legislation may necessitate a change to the Fund’s structure to ensure Investor interests are protected.

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5.21 Property Development RiskThe Property may be subject to development. Development of the Property will subject it to additional risks associated with the timing, completion and cost of the development. For example, completion of delivery of the developments may be delayed (including due to unforeseen circumstances, contractor default and weather), costs associated with the development may be more than anticipated or counterparties involved in the development may default. Any of these circumstances may have an adverse financial impact on the Fund. These risks are substantially mitigated by virtue of the Fund following the investment criteria as they relate to development arrangements.

5.22 General economic risksGeneral economic factors including (but not limited to) equity and credit market cycles and interest rate movements may have an adverse effect on the profitability of investments and the performance of the Fund.

5.23 COVID-19 riskThe market is being impacted by the uncertainty that the COVID-19 outbreak has caused. Pandemic conditions are changing daily at present. If pandemic conditions continue for a prolonged period or there are future outbreaks that result in ongoing and persistent lockdowns, structural changes may occur in the suburban office market, tenant income and tenant viability, amongst other things, may be impacted. Any of these outcomes will affect the performance of the Fund.

We strongly recommend that Investors obtain independent financial advice before investing in the Fund.

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6.1 Acquisition fee 35

6.2 Ongoing management fee 35

6.3 Development management fee 35

6.4. Performance fee 35

6.5 Transfer fee 35

6.6 Additional service fees 35

6.7 Operating costs and expenses 35

6.8 Goods and services tax 36

6.9 Fee changes 36

6.10 Waiver, deferral or rebate of fees and expenses 36

6.11 Halesmith Property fees 36

Fee

and

Cost

s

06

34


Fees and Costs6.1 Acquisition feeThe Investment Manager is entitled to an acquisition fee of up to 1.8% of the purchase price of the Property (excluding any GST component of the purchase price) acquired by the Fund or by the Sub Trust.This fee arises on the date a Property is purchased, and is a result of the Trustee providing its services in locating the Property, negotiating its purchase, establishing and promoting the Fund, negotiating the loan funds and settling the purchase of the Property on behalf of the Investors. It is payable on completion of the acquisition of the assets of the Fund.

6.2 Ongoing management feeThe ongoing management fee shall be an amount up to 0.5% of the greater of the purchase price or the current market value of the Property from time to time. The ongoing management fee is accrued daily and paid quarterly from the assets of the Fund.

6.3 Development management feeThe development management fee shall be an amount determined by the Investment Manager, from time to time, but which is not more than 4.0% of the amount expended by the Fund or the Sub Trust on any structural improvement to, or further development or enhancement of the Property. The development management fee is accrued daily and paid quarterly when construction works occur from the assets of the Fund.

6.4 Performance feeThe Investment Manager’s entitlement to a performance fee is in recognition of the overall performance of the Fund as an investment and is calculated by reference to the internal rate of return achieved by Investors. The performance fee shall be an amount equal to 20.0% of the return received by Investors above a 10.6% internal rate of return (excluding GST) determined at the time of sale of the Property.The performance fee is payable from the assets of the Fund. If the Fund’s term is extended beyond the Initial Term, then the Investment Manager will be entitled

to 50.0% of the performance fee (based on an independent valuation) at the end of the Initial Term with the balance payable upon the sale of the last Property.The Investment Manager will be entitled to the performance fee notwithstanding that:a) it has ceased to be the Investment Manager of

the Fund as at the due date for payment of the performance fee, or

b) its appointment as Investment Manager of the Fund has been terminated.

6.5 Transfer feeThe Transfer Fee is an amount nominated by the Trustee and which is not more than 1.0% of the gross consideration payable for the transfer of any Units (excluding GST component of that consideration). The Trustee is entitled to deduct this amount from any proceeds payable to a transferor. This fee is paid by the by the transferor of the Units and not by other Investors.

6.6 Additional service feesThe Investment Manager is entitled to additional service fees if the Investment Manager provides an additional service to the Fund or the Investors being a service which:a) the Investment Manager is not otherwise

obliged to provide under the terms of this document, and

b) if provided by a person other than the Investment Manager, would result in the Investment Manager incurring an expense on behalf of the Fund.

6.7 Operating costs and expensesThe Investment Manager is entitled to be paid or reimbursed from the assets of the Fund for costs and expenses associated with the operation of the Fund, such as the costs associated with the administration or distribution of income, fees to other service providers and other expenses properly incurred in connection with performing their duties and obligations in the day to day operation of the Fund.

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6.8 Goods and services taxUnless otherwise stated, all fees quoted in this IM are quoted exclusive of GST.The Fund may not be entitled to claim a full input tax credit in all instances.

6.9 Fee changesAn ordinary resolution of Investors is required to increase the percentages or rates applicable to any one or more of the fees to which it is entitled. This means that at least 50 percent of the votes cast by Investors must be in favour of the increase for it to proceed.

6.10 Waiver, deferral or rebate of fees and expensesThe Investment Manager may, in its absolute discretion, accept lower fees and expenses than it is entitled to receive, or may defer payment of those fees and expenses for any time. If payment is deferred, then the fee will accrue until paid. In addition, the Investment Manager may waive, negotiate or rebate their fees.

6.11 Halesmith Property feesHalesmith Property has been engaged by the Trustee to assist in asset management functions for the Fund. Halesmith Property is entitled to an acquisition fee of up to 0.35% of the purchase price of the Property (excluding any GST component of the purchase price) acquired by the Fund or by the Sub Trust.Halesmith Property is entitled to an ongoing asset management fee which shall be an amount up to 0.15% of the greater of the purchase price or the current market value of the Property from time to time. The ongoing management fee is accrued daily and paid quarterly from the assets of the Fund. Halesmith Property will also be entitled to receive 20% of any Performance Fee payable to Realside.

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Taxa

tion

Info

rmat

ion

07

7.1 General Summary of Tax Implications 38

7.2 Foreign Account Tax Compliance Act (FATCA) 38

7.3 Common Reporting Standards (CRS) 38

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7.1 General Summary of Tax Implications The Trustee does not provide financial or tax advice, nor has it obtained taxation advice specific to the Offer the subject of this IM. As such, this IM cannot address all of the taxation issues which may be relevant to the Investor. The Investor must take full and sole responsibility for their investment in the Fund, the associated taxation implications arising from that investment and any changes in those taxation implications during the course of that investment.Before investing in the Fund, you should obtain your own independent tax advice, which takes into account your own circumstances. In particular, you should seek advice on income tax and interest withholding tax liabilities arising out of the investment.

7.2 Foreign Account Tax Compliance Act (FATCA)In compliance with the U.S. income tax laws commonly referred to as the Foreign Account Tax Compliance Act (FATCA) and the Intergovernmental Agreement signed between the U.S. and Australian Governments in relation to FATCA, the Fund may be required to provide information to the ATO in relation to: • investors that are U.S. citizens or residents;• entities controlled by U.S. persons; and• financial institutions that do not complywith FATCA. Where investors do not provide appropriate information to the Fund, the Fund may also be required to report those accounts to the ATO.

7.3 Common Reporting Standards (CRS)The Common Reporting Standard (CRS) is the single global standard for the collection, reporting and exchange of financial account information of foreign residents, which applies to calendar years ending after 1 July 2017. The CRS is similar to FATCA, whereby the Fund may need to collect and report similar financial account information of foreign residents to the ATO. The ATO may exchange this information with the participating foreign tax authorities of those foreign residents.

Taxation Information38


Addi

tiona

l Info

rmat

ion 8.1 Constitution 40

8.2 Reporting 40

8.3 Related party transactions 40

8.4 Change of trustee 40

8.5 Privacy 40

8.6 Anti-money laundering law 41

8.7 Ethical considerations, labour standards and environmental impact 41

8.8 Nocooling-offperiod 41

8.9 Complaints handling 41

08

39


Additional Information8.1 ConstitutionThe Constitution is the primary document governing the relationship between the Investors and the Trustee. It contains extensive provisions about the legal obligations of the parties and the rights and powers of each.Each Unit gives you an equal and undivided interest in the Fund. However, a Unit does not give you an interest in any particular part of the Fund. Subject to the Constitution, as an Investor you have the following rights:a) The right to share in any distributions.b) The right to attend and vote at meetings of

Investors.c) The right to participate in the proceeds of

winding up of the Fund. The Constitution contains provisions about convening and conducting meetings of Investors.The Trustee can amend the Constitution without Investors’ approval.A copy of the Constitution is available free of charge by contacting the Trustee at [email protected] should consider whether it is necessary to obtain independent advice on the Constitution.

8.2 ReportingOur reporting will comprise the following:a) An investment confirmation upon issuing Units.b) An annual performance update report at the

discretion of the Trustee.c) An annual income distribution statement

detailing any investment and distributions paid to you, including an annual tax statement detailing information required for inclusion in your annual income tax return which will be provided within 90 days of the end of each financial year.

8.3 Related party transactionsThe Trustee may from time to time face conflicts between its duties to the Fund as trustee, its duties to other funds that it manages and its own interests. The Trustee will manage any conflicts in accordance with its conflicts of interest policy, the Constitution, ASIC policy and the law.The Trustee and Administrator are related parties. The Trustee and the Custodian are related parties. The contractual arrangements between these parties are negotiated at arm’s length. The Trustee may from time-to-time enter into transactions with related entities. All transactions will be effected at market rates or at no charge.

8.4 Change of trusteeA change of trustee for the Fund requires Investors to pass an Extraordinary Resolution to give effect to the replacement, which must be passed by at least 50% of the total votes that may be cast by Investors entitled to vote (including Investors who are not present in person or by proxy).

8.5 PrivacyIn applying to invest, you are providing the Trustee with certain personal details (your name, address etc). The Trustee uses this information to establish and manage that investment for you.Under the Privacy Act 1988 (Cth), you can access personal information about you held by the Trustee, except in limited circumstances. Please let the Trustee know if you think the information is inaccurate, incomplete or out of date. You can also tell the Trustee at any time not to pass on your personal information by advising it in writing.If you do not provide the Trustee with your contact details and other information, then it may not be able to process your application to invest. Under various laws and regulatory requirements, the Trustee may have to pass-on certain information to other organisations, such as the Australian Tax Office or the Australian Transaction Reports and Analysis Centre.

40


By applying to invest, you give the Trustee permission to pass information it holds about you to other companies which are involved in helping it administer the Fund, or where they require it for the purposes of compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) or in connection with the holding of Application Money. The Trustee may also use your information to provide you with details of future investment offers.

8.6 Anti-money laundering lawThe Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) requires the Trustee to verify your identity prior to accepting your investment. You will be required to provide the Trustee with certain information and documentation to enable us to verify your identity. The Trustee will not issue you with Units unless satisfactory identification documents are provided.

8.7 Ethical considerations, labour standards and environmental impactWhilst the Trustee intends to operate the Fund in an ethical and sound manner, the Fund’s investment criteria does not include giving additional weight to labour standards, environmental, social or ethical considerations.

8.8 No cooling-off periodInvestors should note that no cooling off period will apply to applications.

8.9 Complaints handlingThe Trustee has a system for dealing with any complaints you may have as an Investor. If you have a complaint, then please contact the Trustee.

41


Glo

ssar

y42


GlossaryAct Corporations Act 2001 (Cth) for the time being in force together with the regulations of

the Corporations Act 2001 (Cth).

Administrator Realside Services Pty Ltd ACN 634 572 517.

AFS licence Australian Financial Services Licence.

Allotment Date The date Units are issued to an Investor under this IM.

Application Form The application form to invest in the Fund.

Application Money The money paid by an applicant for Units.

APRA Australian Prudential Regulation Authority.

ASIC Australian Securities and Investments Commission.

Business Day A day on which banks are open for business in Perth, except a Saturday, Sunday or public holiday.

Constitution The constitution of the Fund, as amended from time to time.

Fund Realside 170 Pac Hwy Fund.

IM This information memorandum.

Investment Manager Realside Property Pty Ltd ACN 634 585 210 as the Investment Manager of the Fund.

Initial Term A liquidity event will be offered on the 5th anniversary of the Allotment Date and then 5 years thereafter.

Investor A person who has acquired Units.

IRR Internal rate of return.

LVR Loan to value ratio. The ratio of any outstanding borrowings to the value of the property.

Minimum Offer Amount $23.55 million.

Maximum Offer Amount $25.00 million.

NTA Net Tangible Assets calculated as (Valuation plus cash less debt) divided by equity raised.

Offer The offer under this IM to acquire Units.

Offer Close Date 4 September 2020 or the date the Minimum Offer Amount is raised.

Owner’s Contingency A sum retained by the Trustee from Investor funds for costs such as capital works, tenant incentives and leasing fees.

Property The property is located at 170 Pacific Highway, Greenwich, NSW, and acquired by the Sub Trust on behalf of Investors.

Qualifying Investor A wholesale client as defined in section 761G (7) of the Act or a sophisticated investor as defined in section 761GA of the Act.

Sub Trust A unit trust to be established to acquire the Property, which will be wholly owned by the Fund.

Target Offer Amount $23.55 million.

Trustee Realside Asset Management Pty Ltd ACN 634 575 714.

Vendor 170 Pacific Highway St Leonards Pty Ltd ACN 604 771 726

Unit An ordinary unit in the Fund.

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10.1 Before completing the Application Form you should read this IM carefully 45

10.2 How to invest 45

10.3 Application Form instructions 45

10

How

to In

vest44


How to Invest10.1 Before completing the Application Form you should read this IM carefully. Please pay particular attention to all of the risk factors in section 5 of this IM. The risks should be considered in light of your own investment situation.Where appropriate, you should also consult a financial, taxation or other professional advisor before deciding whether to invest in the Fund.The Application Form is provided separately. Please contact the Trustee at [email protected].

10.2 How to invest For applications submitted on or before the Offer Close Date, you must complete and return your Application Form and pay the application amount no later than 4 September 2020. Payments are to be made by electronic funds transfer to the bank account nominated on the Application Form.You are requested to provide your Tax File Number (TFN), Australian Business Number (ABN) or exemption code, and failure to quote an ABN or TFN will result in tax being withheld by the Trustee on distributions paid to the Investor at the highest marginal tax rate plus Medicare levy. It is not compulsory for you to quote your TFN or ABN.The Trustee has the sole discretion whether to accept or reject an application. If your application

is rejected, wholly or in part, or if the Offer does not proceed, then the Trustee will notify you in writing and arrange for the return of your Application Money to you without any interest earned (less any tax or bank fees paid). By sending a completed Application Form, you are making an irrevocable offer to become an Investor in the Fund and you are agreeing to be legally bound by the Constitution and the terms of the IM. A brief summary of the Constitution is included at section 8.1 of this IM.

10.3 Application Form instructionsOnly legal entities are allowed to invest in the Fund. Applications must be in the name(s) of natural person(s), companies or other legal entities acceptable to the Trustee. At least one full given name and the surname are 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 example of correct forms of registrable title shown below.The Application Form should be signed by the applicant. If a joint holding, all applicants should sign. If signed by the applicant’s attorney, a certified copy of the power of attorney must be attached to the Application Form. If executed by a company, then the form must be executed in accordance with the applicant’s constitution and the Act.

Type of investor Correct form Incorrect formIndividual Mr John David Smith J D Smith

Company JDS Pty Ltd JDS P/L or JDS Co

Trusts Mr John David Smith <J D Smith Family A/C> John Smith Family Trust

Deceased estates Mr Michael Peter Smith <Est Late John Smith A/C> John Smith (deceased)

Partnerships Mr John David Smith & Mr Ian Lee Smith John Smith & Son

Clubs/unincorporated bodies Mr John David Smith <Smith Investment A/C> Smith Investment Club

Superannuation funds John Smith Pty Limited <J Smith Super Trust A/C>

John Smith Superannuation Trust

45


real

side

.com

.au

Sydney Level 3, 28 O’Connell St Sydney NSW 2000

Perth 1202 Hay St West Perth WA 6005

Important InformationThe information in this document (Information) has been prepared by Realside Asset Management Pty Ltd ACN 634 575 714 AFS License 517629 (Realside). TheInformationisofageneralnatureonlyanddoesnottakeintoaccounttheobjectives,financialsituationorneedsofanyperson.BeforeactingontheInformation,investorsshouldconsider itsappropriatenesshaving regard to theirownobjectives,financialsituationandneedsandobtainprofessionaladvice.No liability isaccepted for any loss or damage as a result of any reliance on the Information. Past performance is not a reliable indicator of future performance. Future performance and return of capital is not guaranteed.

Documents

Contents · 2. Notice Realside 170 Pac Hwy Fund | Information Memorandum 3 This Information Memorandum (IM) is dated 13 August 2020 and is issued by Realside Asset Management Pty