INFORMATION MEMORANDUM. Exchange Tower. 2 The Esplanade, Perth WA 6000

Transcription

1 INFORMATION MEMORANDUM Exchange Tower 2 The Esplanade, Perth WA

2 Nature of this Document This document has been issued by Primewest Funds Limited ABN ( Primewest ). Primewest Funds Ltd is the holder of Australian Financial Services Licence No This document is dated 4th December This document is not a prospectus or a product disclosure statement and does not have to comply with the relevant provisions of the Corporations Act 2001 dealing with disclosure documents. This document is for the sole use of the recipient and may not be reproduced or distributed to any other person. If you have received this document from anyone other than Primewest, please return it to Primewest. This document outlines some of the key points in relation to the investment which Primewest proposes to undertake. The matters included in this document do not constitute a comprehensive statement of the costs, benefits, risks and other characteristics of the investment. All potential investors should read this document in its entirety, obtain advice from a suitably qualified professional advisor and make their own assessment of the investment before deciding to invest. This document does not constitute advice on legal, taxation and investment matters and does not take into account the investment objectives or the personal financial circumstances of any person to whom it is provided. Therefore, you should consult with a suitably qualified professional advisor to assist you in making your decision whether or not to invest. Distribution of this document outside Australia may be restricted by law. Persons who come into possession of this documentwho 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. No action has been taken to register securities outside Australia. This document has not been registered as a prospectus with the Monetary Authority of Singapore. This document and any other document or material in connection with the offer or sale, or invitation for subscription or purchase of the Units may not be circulated or distributed, nor may the Units be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore except to institutional investors (as defined in the Securities and Futures Act, Chapter 289 (the SFA )), or otherwise pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA. This document has been given to you on the basis that you are an institutional investor (as defined under the SFA). In the event that you are not an institutional investor, please return this document immediately. You may not forward or circulate this document to any other person in Singapore. Any offer is not made to you with a view to the Units being subsequently offered for sale to any other party. You are advised to acquaint yourself with the SFA provisions relating to resale restrictions in Singapore and comply accordingly. 2

3 Disclaimer Whilst this document includes information about Primewest, the nature of the investment, the Property and other matters, it is not exhaustive in its contents and should not be considered as such. All projections and forecasts in this document are for illustrative purposes only using those sources as described. They are based on the opinions of, and the assumptions and qualifications made by the directors of Primewest as at the date of this document. Actual results may be materially affected by changes in economic and other circumstances. Any reliance placed upon the accuracy of projections, forecasts and other information provided in this document, and the appropriateness of opinions, assumptions and qualifications used, is a matter for your own commercial judgment. No representation or warranty is made that any projections, forecasts, values, assumptions or estimates contained in this document can or will be achieved. Notwithstanding that parties other than Primewest are named in this document, none of those other parties was involved in the preparation or issue of this document and therefore, none of those other parties has any responsibility for the contents of this document. Primewest and its directors, officers, employees, advisers and representatives:- give no warranty and make no representation in respect of the contents of this document; and accept no responsibility for the accuracy, reliability or completeness of the information provided in this document Investors Investment is only available to investors who are wholesale clients within the requirements of section 761G and 761GA of the Corporations Act 2001 (Cth) or who are otherwise entitled to invest see section 5 of this document for more detail. 3

4 CONTENTS Investment Highlights Property Overview Market Overview Financial Analysis The Trust Risk Factors Manager s Fees & Charges Additional Information Trust Application Form

5 INVESTMENT HIGHLIGHTS 1 5

6 OVERVIEW Exchange Tower is a prominent, premium grade, office building in the Perth CBD. The Trust will acquire a 50% interest in Exchange Tower on substantially discounted terms compared to the peak values achieved in recent years. Key attributes of the Investment are:- WALE (weighted average lease expiry by income) 3.3 years (approx.) Minimum 4 year investment term Forecast (year 1) return 7.25% Average return (4 years) 9.1% p.a. Forecast IRR (4 years) 15.5% Simple unit trust structure suitable for Superannuation Fund THE PROPERTY Exchange Tower is an iconic property and one of only a handful of premium grade buildings in the Perth CBD. Boasting expansive views across the Swan River, Supreme Court Gardens and surrounding parklands, Exchange Tower comprises 33 levels of office accommodation, ground floor retail and five levels of basement car parking. The Property highlights include:- Building NLA 34,360sqm 227 Car bays 4.5 star NABERS rating Occupancy 62% Prime location in the core of the Perth CBD and immediately adjacent to Elizabeth Quay. The Trust will acquire a 50% interest in Esplanade Property Trust which holds a Leasehold Interest (freehold interest is owned by the Trustee of the Weld Club) for a period of 135 years commencing on 27th November There is approximately 107 years remaining on the Leasehold tenure. AMP Capital Investors via the AMP Wholesale Office Fund (AWOF) holds the other 50% interest in the Esplanade Property Trust. 6

7 INVESTMENT STRATEGY The investment strategy includes:- Comprehensive capital works program to ensure that Exchange Tower maintains its premium building status Implement a strategic and comprehensive leasing strategy to reduce the building vacancy Transition Exchange Tower to become broadly appreciated as Perth s best located premium corporate address linking the financial services precinct of the CBD with the Elizabeth Quay mixed use and entertainment precinct. PROJECTED INVESTMENT RETURN Projected Internal Rate of Return (projected return based upon assumptions contained in Section 4) 15.5% p.a. Projected Cash Return on Equity Year One 7.25% Average (4 year forecast period) 9.1% The projected returns are indicative only and are not guaranteed by Primewest. 7

8 APPLICATION CLOSING DATE Wednesday 16th December ACQUISITION DETAILS Purchase Price: $ 113,500,000 Owner s Reserve On Costs: Total: Funded by: Debt: Equity: $ 12,404,793 $ 9,020,208 $ 134,925,000 $ 62, 425,000 $ 72,500,000 Valuation: (prepared by Knight Frank as at 31 December 2015) $ 227,500,000 (100% interest) SETTLEMENT DATE Settlement Date 1 February 2016 (scheduled). INVESTMENT STRUCTURE A special purpose Unit Trust, Primewest Exchange Tower Trust ( the Trust ) is being established for the acquisition of a 50% interest in the Esplanade Property Trust. Investors will be issued Units in the Trust. For liquidity of Units refer to Section 5. 8

9 MANAGER AND TRUSTEE OF THE TRUST Primewest Funds Ltd ACN , AFSL: of Level 1, 307 Murray Street, Perth, Western Australia. The Manager will hold assets and manage the Trust for the Unitholders and provide the Trust Management Services, including maintaining a reporting system that will provide the Unitholders with information on an annual basis concerning the management and investment performance of the Trust. The Manager will also perform Asset Management Services in relation to the Trust s unit holding in the Esplanade Property Trust. The Manager is entitled to fees as set out in Section 7 for performance of these duties. THE OFFER FOR UNITS IN THE TRUST Proposed minimum raising of $72,500,000, in the form of 72,500,000 units of $1 each, to assist with the purchase of the units in the Esplanade Property Trust. Applications must be made by Wednesday 16th December Units must be paid by the way of 10% on application, with the balance no later than Monday 25th January INVESTMENT TERM An investment in the Trust should be considered long term. At the end of year 4, the Manager will provide a recommendation to Unitholders taking into account the leasing uptake of the Property and the state of the Perth office market in general, to either exit the investment or to extend the term of the Trust by up to 2 years. A vote by Unitholders representing 50.1% by value will be required to approve the Manager s recommendation. The Manager will review the investment term every second year thereafter and provide its recommendation for majority Unitholder approval. The Term will not exceed 10 years. 9

10 DEBT FUNDING Primewest, as Manager, will also source debt funding for the acquisition of the 50% interest in the Esplanade Property Trust and, if applicable, for any other purpose such as to improve the Property. An Indicative Offer for Debt funding has been received from an Australian Bank. Details of this Offer are summarised in Section 4. Debt funding for the acquisition of the 50% interest in the Esplanade Property Trust will be $62,425,000 which is 55% of the contracted price of the Property. The debt funding will be non-recourse to the Unitholders and only secured over the assets of the Trust generally. The Manager may at its discretion increase the loan to value ratio to 65% non recourse to accommodate a fall in capital value or to fund capital works or tenant incentives. 10

11 FURTHER INFORMATION If you require any further information on this property, please contact us:- Mark Vonic Chief Investment Officer Mob: Julian Lodge Chief Executive Officer Mob: John Bond Director Mob: David Schwartz Director Mob: Jim Litis Director Mob: Address: Level Murray Street PERTH WA 6000 Telephone:

12 PROPERTY OVERVIEW 2 12

13 LOCATION Exchange Tower is located in the heart of the financial district of the Perth CBD and occupies a premier site with extensive frontages to two major city thoroughfares The Esplanade and Sherwood Court, both of which will benefit substantially given their proximity to the new Elizabeth Quay precinct. Exchange Tower benefits from vibrant city views along St Georges Terrace and panoramic views across the Swan River, Supreme Court gardens and surrounding parklands. Elizabeth Quay will ultimately accommodate office, residential, hotel and entertainment uses around a newly created inlet from the Swan River. It will refocus the centre of the Perth CBD, linking the city to the Swan River, and becoming one of Perth s premier destinations for office tenants, residents and visitors alike. In terms of existing office buildings, Exchange Tower has the potential to become one of Perth s largest beneficiaries of the Elizabeth Quay development. Exchange Tower is conveniently located within 300 meters of rail, bus and ferry terminals. 13

14 LOCATION MRA RIVERSIDE PROJECT EXCHANGE TOWER LANGLEY PARK PERTH STATION ST GEORGES TERRACE ELIZABETH QUAY THE ESPLANADE TRAIN & BUS STATION PERTH CONVENTION CENTER 14

15 IMPROVEMENTS Exchange Tower is a dominant and iconic building and one of only a handful of premium grade buildings in the Perth CBD. Boasting impressive views across the Swan River, Supreme Court gardens and surrounding parklands, Exchange Tower comprises 33 levels of premium grade office accommodation, ground floor retail and 5 levels of basement parking. Flooded with natural light, Exchange Tower offers facilities including climate controlled air conditioning, security systems, high speed lifts, a multi-functional conference suite, lockers and shower facilities. The office floors generally comprise carpeted floors, suspended acoustic tile ceilings incorporating recessed fluorescent lights and diffusers, air conditioning ducts and are fully sprinklered. All floors comprise separate male and female toilet amenities. The plant and service cores are located along the northern boundary of the office floors to ensure the views are maximised throughout the office floors. The flexible floor plate configuration is suitable for whole floor tenants, or can be readily subdivided into smaller tenancies. Typical office floorplates range from 609sqm (level 8) up to 1,474sqm in the low rise podium to level 15. Upper level floors (from level 16) typically range between 1,020 and 1,094 sqm. Exchange Tower features a multi-functional Conference Centre facility, located on Level 8 which includes audio, visual and kitchen facilities and can accommodate up to 140 people. The building provides secure, undercover parking for 227 vehicles over five basement levels which equates to a generous car parking ratio of 1 : 151 sqm NLA. The carpark is easily accessible via Sherwood Court or a secondary entrance from The Esplanade. The top three levels of the basement are accessible from the office tower via an internal lift lobby whilst the two lower 15

16 IMPROVEMENTS basement levels are accessed via internal stairwells. 60 car spaces are allocated for the exclusive use of the Weld Club under the ground lease agreement. Exchange Tower has recently unveiled new End of Trip facilities that are comparable to any available in the Perth CBD. The facilities comprise: 95 Bicycle racks, 156 lockers, and 14 showers and toilet amenities. An independent technical due diligence report has forecast approximately $6,705,000 (50% interest) in capital expenditure over a 10 year forecast period. In addition Primewest has made provision for Building refurbishment, including building entry, lobby, tenancy bathroom, lobby and general office accommodation refurbishments totaling $5,699,793 (50% interest). TENANCY DETAILS Exchange Tower is a multi tenanted office building. The Tenancy details are summarised as follows:- Tenant Expiry Date NLA %NLA Passing Rental Knight Frank 31-Dec-23 1, % 6.8% Moor Stephens Perth Pty Ltd 28-Feb-26 1, % 5.0% Patersons Securities 31-Dec-25 1, % 8.1% Mitsubishi Australia Ltd 28-Oct-21 1, % 4.8% Bain International 30-Nov % 4.1% Comm of Australia - M&PS 31-Dec-23 1, % 8.3% Bell Potter Securities 30-Jun % 3.7% Azure Capital 30-Sep-19 1, % 4.9% Mitsui & Co 30-Sep19 1, % 4.4% Inpex Browse 30-Nov-17 1, % 5.3% Other 31-Aug-25 9, % 44.1% Vacant - 12, % 0.4% Total 34, % 100.0% 16

17 TITLE DETAILS AND OWNERSHIP STRUCTURE The property is located at 2 The Esplanade, Perth WA. Exchange Plaza s freehold tenure is owned by the trustee of the Weld Club. A Ground Lease over the property for a term of 135 years commencing 27th November, 1987 is held by Perpetual Trustees on behalf of Colonial First State Property Limited and AMP Capital Investors equally. The Interest being offered for sale is the 50% leasehold interest owned by Perpetual Trustees on behalf of Colonial First State Property Limited. A summary of the Ground Lease terms are outlined below; Premises Land comprising certificate of title Volume 2105 Folio 150 Commencement 27 November 1987 Lease Term Minimum Base Rent Current Estimate Outgoings Reviews Car Parking GST 135 years $750,000 pa $1,140,000 pa Lessee to pay all rates and taxes Annually, based on a structured formula equating to approximately 10%* of the net income, where the net income equals gross income less operating expenses and owners expenses 60 of the 227 car parking bays allocated to the Lessor Lessor to pay all GST 17

18 TITLE DETAILS AND OWNERSHIP STRUCTURE Perpetual Trustees sub leases back to The Weld Club part of the site including the Club grounds, car bays and Club car park lifts. The term is 128 years 9 months and 25 days from 1st February 1994 and the sub lease provides for a contribution by The Weld Club towards outgoings. The Vendor and AMP Capital Investors are parties to a joint ownership agreement which regulates their rights and obligations as co-owners of the Property. The parties agree to appoint two members each to a committee that is established for the purpose of managing the Property, including leasing, incurring operating expenses, capital expenditure and approval of budgets. The agreement sets out the parties rights to income and liability to contribute to expenses for the Property, and provides for pre-emptive rights in favour of each co-owner if the other wishes to dispose of its interest in the Property. In addition to acquiring a 50% interest in the Esplanade Property Trust the transaction also includes the 50% acquisition of EPM. EPM is the manager of the Esplanade Property Trust. EPM is controlled by the same persons that hold units in the Esplanade Property Trust. VALUATION Exchange Tower has been valued by Knight Frank as at 31 December 2015, and they have assessed the current market value of the property at $227,500,000 (100% interest). This compares to the assessed Insurance Replacement Value of $236,029,000 (excl gst). A copy of the valuation report is available upon request. 18

19 MARKET OVERVIEW 3 19

20 PERTH OFFICE MARKET OVERVIEW The office market is still experiencing negative net absorption as a result of a soft Perth CBD leasing market with negative 19,875m2 recorded for the six months to July 2015, resulting in a rise in the vacancy to 16.6%. The high vacancy rate is being caused by negative demand for new office space and new office stock coming into the market. The current Perth CBD office market is allowing tenants the opportunity to seek better quality space and obtain greater incentives and in turn reset their passing rentals. Tenants upgrading from secondary to prime grade properties are ideally looking for small to mid-sized space at competitive rents with a longer lease term and increased incentives. The incentives that tenants are seeking include rent free periods/rebates as well as capital contributions for office fit-outs which in turn minimises the cost for the tenant going forward with the move. Perth office rents continued to moderate over the first half of the year and have fallen steadily since the peak in July 2012 when net face rentals reached $805/m2 for Prime grade office space and $616/m2 for Secondary. Net effective rents are being significantly impacted as rising incentives flow through. Current rents and the cost of incentives are working against the viability of new developments. Demand is soft, but many tenants are taking advantage of incentives to relocate to higher quality office space. Incentives have now risen to average circa 45%, up from 35% in January Incentive levels are expected to remain high as vacancy levels rise further into Outlook Tenant enquiry levels indicate net absorption will remain weak for the near term. Nevertheless, falling rents and increasing incentives are providing tenants with some favourable leasing options which is expected to stimulate tenant migration to better quality premises. Going forward, Perth CBD prime rents may begin to stabilise 20

21 PERTH OFFICE MARKET OVERVIEW but little to no improvement is expected before 2017 as the market absorbs significant levels of supply forecast to come online in the Perth CBD. In terms of supply over the next six months, there is very little coming onto the market in 2016 and 2017 with one new development, Capital Square, on the horizon for Knight Frank expects the vacancy to peak at around 22% in mid 2016 then remain steady through to Any reduction thereafter will only come from improving demand conditions and a continued lack of new supply. With domestic and offshore investors seeking to expand their presence in the Perth market, coupled with a low Australian dollar and low interest rates, it is anticipated that investment demand for Perth CBD office assets will improve with the majority of buyer attention continuing to focus on securely leased prime assets. The limited number of sales is partly attributable to the tightly held nature of the market, with few properties being listed. Source: Knight Frank Perth CBD Office Market Brief October

22 FINANCIAL ANALYSIS 4 22

23 FINANCIAL ANALYSIS Purchase Assumptions: Purchase price Stamp duty Legal, bank fees & due diligence Acquisition fee Owners contingency TOTAL $113,500,000 $5,842,207 $340,500 $2,837,500 $12,404,793 $134,925,000 Purchase snapshot: Valuation Net Tangible Assets Initial passing yield Capital rate per meter Equity Required Debt TOTAL 113,750, % 7.0% $6,607 $72,500,000 $62,425,000 $129,925,000 Forecast returns: Calendar year Forecast Return on Equity % 8.6% 9.1% 11.4% Forecast IRR 15.5% (post Fees) 23

24 PROJECTION Projected Cashflow Assumptions: Units Purchase: The purchase price of the units in the Esplanade Property Trust is $113,500,000. The acquisition of units in a unit trust is treated as being an acquisition of an interest in securities for GST purposes. The supply or acquisition of securities is input taxed and not subject to GST. Accordingly, the purchase price has not been grossed up to account for GST and there has been no allowance for the refund of GST by way of input tax credits. Acquisition Costs: An allowance that will be attributed to costs associated with the acquisition and settlement of the units in the Esplanade Property Trust, including Stamp Duty, preparation of the Trust Deed, due diligence costs, Primewest Establishment Fee, plus the cost of obtaining finance including valuation of the Property. Net Rental Income: Current net rental income is based on the tenancy schedule provided by the vendor, refer Section 2 Property Overview for a summary of the Tenants. Future rental income, e.g. after expiry of a lease, not covered by the tenancy schedule have been based on the Primewest Directors forecast of future market conditions. A delay in finding suitable tenants at the projected rents will affect the performance of the investment. Interest Costs: Indicative offers for debt funding indicate interest rate margins of 1.5% inclusive of costs and brokerage fees. This is based on a three year facility. The cash rate is currently 2.19%. Actual interest rate costs may vary between now and Settlement, and may also vary throughout the Investment Term. Interest rates used for future years represent the Primewest Directors forecast of rate movements in future years. Actual interest rates may be higher or lower than the Directors forecast during 24

25 PROJECTION the investment period. Owner s Reserve: At settlement an Owner s Reserve account will be established in the name of the Trustee with an initial deposit of approximately $12,404,793. These funds will be applied to expenses such as capital works, tenant incentives, leasing fees, or investor distributions. Any surplus funds in the Owners Contingency at the end of the Term will be returned to Unitholders. Building Allowances & Depreciation: Income Tax deductions for 2.5% building allowance and plant and equipment depreciation are expected to continue being claimed by the Esplanade Property Trust in respect of the Property. FUNDING There will be two sources of funding to meet the project costs:- Investor Equity: $ 72,500,000 Borrowings: $ 62,425,000 TOTAL $ $ 134,925,000 a) Investor Equity Subscriptions for Units in the Primewest Exchange Tower Trust will be sought for a minimum amount of $72,500,000 of investor equity. This amount will be payable at the time of application for units in the trust being no later than Wednesday, 16th December 2015, to be held on trust by solicitors Jackson McDonald and used to pay the deposit, stamp duty, due diligence costs and fund the purchase of the property. If the minimum subscription is not achieved and the Trust does not proceed, all application money will be refunded in full but will carry no interest. The Manager may take subscriptions above the minimum amount, at its discretion. 25

26 FUNDING b) Borrowings The Manager has received an indicative offer of finance from an Australian Bank. The offer is subject to formal credit approval however the Manager anticipates that the terms will be similar to the following:- Loan principal of up to $62,425,000. Margin of 1.5% over BBSY including costs and brokerage fees. Application Fee of up to 0.25%. Loan to Value Ratio (LVR) of up to 55% of Valuation. Loan term 36 months. Interest will be paid on a monthly basis over the term. The loan is to be a non-recourse loan. The lender will secure the loan against the assets of the Unit Trust only there will be no recourse to the investors. Security: A first ranking mortgage will be registered over the assets of the Trust. The Manager may choose to fix the interest rate on any loan facilities, although it is not obliged to do so. 26

27 CASH FLOW Year ending 31 December Rental Cash Flows Net Income ( after Letting up, Incentives) Intrest Income $8,648,757 $82,343 $9,960,706 $56,706 $10,916,126 $33,280 $13,140,484 $10,648 Rental Cash Flow $8,731,100 $10,017,411 $10,949,407 $13,151,132 Asset Management Fee Ground Rental (567,500) (569,741) (633,942) (683,689) (676,877) (1,025,534) (825,000) (1,222,048) Net Cash Flow before Interest $7,593,858 $8,699,779 $9,246,995 $11,058,083 Debt Base rate Margin Total interest rate Less Interest paid (2,340,938) (2,497,000) (2,653,063) (2,809,125) Net Cashflow After Interest $5,252,921 $6,202,780 $6,593,933 $8,248, % 1.50% 3.75% 2.50% 1.50% 4.00% 2.75% 1.50% 4.25% 3.00% 1.50% 4.50% Return on Equity 9.1% 7.25% 8.6% 9.1% 11.4% average End Value yield Incentive payout (est) Selling Costs Debt repayment 7.20% 0.55% $165,000,000 -$1,691,304 -$907,500 -$62,425,000 Cash Flows for IRR calculations (72,500,000) $5,252,921 $6,202,780 $6,593,933 $108,225,154 Pre fee IRR for Investor Post fee IRR for Investor Interest Cover Ratio (forecast) Loan Balance Cap Rate Net rent per metre Capital rate per metre Valuation LVR Owners reserve (estimated at year end) 16.3% 15.5% ,425, % $850 $6, ,500,000 55% $8,234, ,425, % $684 $7, ,788,425 49% $5,040, ,425, % $689 $7, ,375,435 46% $2,662, ,425, % $754 $9, ,000,000 38% $774,395 Allowences accounted for in Net Income figure p.a Capital Expenditure Downtime Incentives + Leasing Costs -11,630,398-8,500,534-5,563,655-4,170,525-4,112,201-1,195,333-3,193,775-1,934,872-2,697,508-2,378,073-1,655,089-1,277,881-1,888, , ,933 Total -25,694,587-9,478,059-7,826,156-5,311,043-3,079,329 * 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. 27

28 THE TRUST 5 28

29 INVESTMENT STRUCTURE Primewest Funds Ltd will act as Trustee and Manager of the Unit Trust. The role of Primewest Funds Ltd is to hold assets of the Primewest Exchange Tower Trust, provide management and administrative services to the Unit Trust and asset management services in respect of the investment generally. The Unit Trust structure for the acquisition of the units in the Esplanade Property Trust is generally considered suitable for investment by Superannuation Funds. Prospective Investors should however seek their own specialist advice in this regard. TRUST DETAILS The Trust is being established to acquire and hold units in the Esplanade Property Trust with the primary purpose being to derive trust distribution income. The trust distribution income will primarily be sourced from rental income derived by the Esplanade Property Trust from the leasing of the Property. The Investment The Trust will be a unit trust and an investment can be made by applying for Units at an issue price of $1.00 each. The Manager is seeking to raise a minimum amount of $72,500,000 by offering 72,500,000 Units for subscription. Each Unit will be issued for an issue price of $1.00. The investment is only available to investors who are wholesale clients within the requirements of Section 761G and 761GA of the Corporations Act 2001 (Cth) or are otherwise entitled to invest as described below. To qualify, an investor must satisfy one of the following:- a) the investor is a wholesale client for the purposes of section 761G of the Corporations Act, in that: 29

30 TRUST DETAILS i. the price payable by the investor for its Units is a minimum amount of $500,000.00; or ii. the Units are acquired by the investor for use in connection with a business that is not a small business (as defined in section 761G(12) of the Corporations Act); or b) the investor is a wholesale client for the purposes of section 761G of the Corporations Act, in that the Units are not acquired for use in connection with a business and the investor has given to the provider of the Units, before the issue of the Units, a copy of a certificate given within the preceding 24 months by a qualified accountant (as defined in section 9 of the Corporations Act) that states that the investor:- i.has net assets of at least $2,500,000.00; or ii.had a gross income for each of the 2 financial years immediately prior to subscribing for Units of at least $250, a year; or c) the investor is a professional investor, as defined in the Corporations Act; or d) the investor is otherwise deemed to be a wholesale client for the purposes of the Corporations Act; or e) the investor is a sophisticated investor in respect of whom the requirements of section 761GA of the Corporations Act have been satisfied; or f) the investor has applied for Units in response to a personal offer made to the applicant as part of a small scale offering in accordance with section 1012E of the Corporations Act. 30

31 TRUST DETAILS Liquidity and Withdrawal The Trust will be illiquid due to the:- Medium to long term nature of the investment; Unitholders not having the capacity to withdraw from the Trust prior to its termination; and; the limited secondary market for Units. During the life of the Trust a Unitholder may, subject to the terms of the Trust Deed, sell or transfer their units at any time, subject to payment of transfer costs which may include stamp duty. Trust Distributions It is expected trust distributions will be made during the investment term which can form income and/ or capital amounts. Payments of cash distributions to Unitholders are planned to be made quarterly in arrears. This is subject to change at the discretion of the Manager. Term of Investment An investment in the Trust should be considered long term. At the end of year 4, the Manager will provide a recommendation to Unitholders,taking into account the leasing uptake of the Property and the state of the Perth office market in general, to either exit the investment or to extend the term of the Trust by up to 2 years. A vote by Unitholders representing 50.1% by value will be required to approve the Manager s recommendation. The Manager will review the investment term every second year thereafter and provide its recommendation for majority Unitholder approval. Reporting The Manager will report to the Unitholders on an annual basis. This report will contain a brief summary concerning the management and investment performance of the Trust. 31

32 TRUST DETAILS Subscription Monies The subscription amount being sought under this Proposal is $72,500,000. Should the Trust not proceed, the application funds received will be refunded. No interest will be paid on refunded applications. Conflicts of Interest The Directors and staff of Primewest, or members of their families or entities which they control or have an interest in, may also invest in the Trust. They may also indirectly benefit from any management fees charged in relation to the management of the Trust. Copies of the Trust Deed Copies of the Trust Deed are available at the office of Primewest and upon request, free of charge. The Units in the Esplanade Property Trust are being acquired by a sole purpose trust established for the investment. Asset Management and Trust Management The Asset Management and Trust Management will be undertaken by Primewest Funds Ltd ( The Manager ). The Manager will be responsible for matters including:- Coordinate the pre-acquisition Due Diligence program including the appointment of Valuers, Legal service providers and Technical Due Diligence consultants. Where appropriate, the Manager may appoint other service providers to assist in the completion of its Due Diligence enquiries. Arrange debt funding and manage the ongoing reporting obligations and refinancing as required. Coordinate Settlement of the units in the Esplanade Property Trust. Optimise financial performance of the investment. 32

33 TRUST DETAILS Appoint and oversee the property manager(s) and leasing agent(s). Render an annual report and statement of account. Arrange property insurance. Tenancy management. Equity raising and debt funding. Development management (if required). Trustee Primewest Funds Ltd will act as Trustee of the Unit Trust. This role involves holding assets of the Primewest Exchange Tower Trust. Projected Return to Unitholders The property is projected to achieve an initial return on equity of 7.25% in year one as forecast in Section 4; however this is not guaranteed by the Manager. The financial projections in this Information Memorandum have been prepared using various assumptions which have been made based on the best estimates of the Manager, as shown in Section 4. Potential members should appreciate that many factors which affect these projections are outside the Manager s control and cannot be foreseen. As such, the actual results may differ from those projected. The projected results demonstrate the expected return inflows and outflows of the Trust before tax and other non-cash deductions are taken into account. About Primewest Funds Ltd Primewest Funds Limited is the holder of Australian Financial Services Licence No Primewest Funds Ltd is a related company of Primewest Management Ltd, which also holds an Australian Financial Services Licence , and is an established syndicator and developer which invites like minded participants to benefit from its property expertise. With more than a decade of experience, Primewest commands a national property portfolio exceeding $2.0 billion. The portfolio includes shopping centres, large format retail, offices, industrial, land 33

34 ESPLANADE PROPERTY TRUST STRUCTURE Primewest funds Ltd as trustee for the Primewest Exchange Tower Trust The Trust Company (Australia) Limited as custodian for AMP Capital Investors Limited as 50% 50% Esplanade Property Trust (EPT) 100% Trustee (Perpetual) 1 Manager (EPM) 2 50% 50% Primewest Exchange Tower Entity The Trust Company (Australia) Limited as custodian for AMP Capital Investors Limited as trustee of AMP Capital Wholesale (1,000 shares) Exchange Tower Perth Property Manager (Knight Frank) 1. Perpetual Trustee Company Limited (Perpetual) 2. Exchange Plaza Management Pty Ltd (EPM) 34

35 DIRECTORS & KEY EXECUTIVES John Bond Director John is a founding Director of Primewest and has been instrumental in its growth and development. His background spans law, investment banking as well as property investment and development. As a professional property investor, he has over 20 years experience in negotiating acquisitions, overseeing the development of properties and asset management. He is a qualified solicitor and also holds a Bachelor of Commerce degree and is a Corporate Member of the Property Council. He is Chairman of The Fathering Project and a non-executive Director of ASX listed Fleetwood Limited and the Art Gallery of WA Foundation. David Schwartz Director David is a founding Director of Primewest and has been instrumental in its growth and development. He is a professional property investor with 25 years experience in negotiating acquisitions and overseeing the development of properties. He is Non-Executive Director of Schaffer Corporation Ltd and the Betts Group Ltd. He is Executive Chairman of Pascoe s Pty Ltd. His property investments have been strongly focused on retail and commercial developments. Jim Litis Director Jim is a founding Director of Primewest and has been instrumental in its growth and development. Jim qualified from Curtin University with a Bachelor of Science (Pharmacy). However, not long after obtaining his degree, Jim decided to venture into retail and opened Douglas Hi Fi followed shortly thereafter with a Sony Central store. The business was a great success and eventually it was sold in late 1988 to a large public company. It was in the early 80 s that Jim s interest in commercial property investments began with the acquisition of several CBD properties and a small shopping centre. 35

36 DIRECTORS & KEY EXECUTIVES Julian Lodge Chief Executive Officer Julian has over 20 years experience in the property industry with particular capabilities in property development and the asset management of property investments. His focus lies with the management of Primewest and the optimum performance of each of its assets. He holds a Diploma of Financial Markets (FINSIA), is a Senior Associate Member of FINSIA and is also a qualified Real Estate Agent. Mark Vonic Chief Investment Officer Mark has over 15 years experience in the property funds management industry in Australia, Asia and Europe, in roles ranging from acquisition and due diligence management to structuring and corporate governance. Mark oversees the acquisition and divestment strategy for Primewest and works closely with the asset management team to deliver investment outcomes. He holds a Bachelor of Economics and is a Fellow of FINSIA. He is a Board Member on the Property Council Western Australian Divisional Council. 36

37 RISK FACTORS 6 37

38 RISK FACTORS There are always risk factors associated with property investment some of which relate directly to the property and some of which are economic and global in nature. Those listed below are perceived by the Manager to be the most relevant but this list is not exhaustive as there may be other risk factors. Loss of Tenants The Property has multiple tenants; however the 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. Additionally, should the Property not lease within the time frame, or on the terms, forecast by the Manager, this will also impact on the performance of this investment. Interest Rates Interest rates may rise or fall over the duration of the Trust. The forecast interest rates in the project feasibility are based on rates currently available. Assumptions regarding interest rates in future years are based on the Managers best assumptions, as shown in Section 4. Market Conditions The 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 Primewest Exchange Tower Trust may be adversely influenced by the following factors:- A downturn in the property market in general. A downturn in the Australian or Western Australian economies. A further downturn in the Perth Office market. Projected Returns are not Realised This Information Memorandum contains projections based on many factors beyond the control of the Manager. The projection assumptions are based on the following external information:- 38

39 RISK FACTORS Likely Perth office rental and leasing rates and incentive levels from real estate agents. Likely building costs and building cost escalation levels if renovations or extensions are considered. Likely interest rate and financing costs from the preferred financier. Regulatory Changes The introduction of new, or amendment of existing, legislation may have a detrimental effect on the property. Illiquid Investment The Trust will be illiquid due to the:- a) Medium to long term nature of the investment; b) Unitholders not having the capacity to withdraw from the Trust prior to its termination; and, c) the limited secondary market for Units. During the life of the Trust a Unitholder may, subject to the terms of the Trust Deed and payment of transfer cost which may include stamp duty, sell or transfer their units at any time. Buildings are Destroyed While the Trust owns units in the Esplanade Property Trust, the Manager will put in place the normal commercial insurance policies to cover damage or destruction of the Property, 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. Breach of Banking Covenants & Refinancing The Manager will obtain debt funding to complete the acquisition of the units in the Esplanade Property Trust and potentially for future capital expenditure. The Bank will impose lending covenants that will include, amongst other things, Loan to Value and Interest Cover ratios. In the event of a breach of any Bank covenant, that is not remedied, the Bank will have the right to take certain measures which may include, but not be limited to, withholding income from the Trust, or in the 39

40 RISK FACTORS most serious instances, the forced sale of the Trust s units in the Esplanade Property Trust. If any of the facilities are not renewed or additional conditions are imposed this may impact on the return to Members. Owners Contingency The Manager will establish an Owners Reserve to pay any unforeseen expenses. In the event that the account is exhausted, the Manager may be required to reduce income distributions to Members or require a capital contribution from Members to provide for any shortfall in recurring expenses (e.g. interest payments). Unexpected Capital Expenditure In the event of unexpected capital expenditure the Manager will use cash reserves from the Trust Owners Contingency. Should expenditure be greater than the amount held in cash reserves, the Manager may borrow against the unencumbered equity of the Trust. Environmental Whilst the Esplanade Property Trust is currently considered to comply with all environmental laws there may be issues arise in the future which require corrective action or unexpected expenditure. General A subscription in this Trust is subject to investment risk, including the loss of income and capital. The Manager does not guarantee the performance of the Trust or return of capital. 40

41 MANAGER S FEES AND CHARGES 7 41

42 MANAGER S FEES AND CHARGES Disclosure of Interests The following is a disclosure of the fees which the Manager is entitled to charge. These fees will be payable out of subscription funds, Trust income and assets (other than the Transfer fee):- Establishment Fee The establishment fee shall be an amount equal to 2.5% of the Purchase Price of the Property as detailed in section 4 (excluding any GST component of the purchase price). This fee arises on the Purchase Date as a result of the Manager providing its services in locating the investment, negotiating its purchase, establishing and promoting the Trust, negotiating the Loan Funds and settling the purchase of the investment on behalf of the Members. Asset Management Fee The annual asset management fee shall be an amount equal to 0.5% of the current market value of the Property from time to time. Development Management Fee The development management fee shall be an amount determined by the Manager, from time to time, but which is not more than 4% of the amount expended by the Manager on any structural improvement to, or further development or enhancement of the Property. It should be noted that this Property is largely fully developed and therefore this fee is likely to be limited to circumstances where the Manager is required to take a supervisory role on relatively incidental building works and/or refurbishment. Transfer Fee The transfer fee shall be an amount nominated by the Manager and which is not more than 1% of the gross consideration payable for the transfer of any Units(s) (excluding GST component of that consideration). This fee is payable by the transferor of the Units and not by other Members. 42

43 MANAGER S FEES AND CHARGES Performance Fee The Manager s entitlement to the Performance Fee is in recognition of the overall performance of the Property as an investment and is calculated by reference to the internal rate of return achieved on the investment. The Performance Fee shall be an amount equal to 20% of the return received by Unitholders above a 12% internal rate of return (excluding GST) determined at the time of Sale of the investment subject to a minimum fee equal to 2% of the aggregate sale price of the Property. In other words, Unitholders must first receive a compounded total return of 12% per annum, before the Manager is entitled to the Performance Fee. In the event there are surplus returns above the 12% hurdle rate ( Outperformance ), the Manager will be entitled to 1/5th of the Outperformance amount. If the Property is not sold at the end of year 6 the Manager will be entitled to 50% of the Performance Fee (based on an independent Valuation) at the end of the Initial Term with the balance payable upon ultimate sale. Additional Service Fees The Manager is entitled to additional service fees if the Manager provides an additional service to the Trust or the Members being a service which:- The Manager is not otherwise obliged to provide under the terms of this document; and If provided by a person other than the Manager would` result in the Manager incurring a Trust Cost. GST Exclusive The Manager s Fees are calculated on a GST Exclusive basis. The Manager is entitled to recover, in addition to the Manager s Fees, an amount equal to the GST payable by the Manager in respect of the taxable supplies made by the Manager in relation to these Fees. The Manager will issue tax invoices in respect of the Management Fees charged. The Trust may only be entitled to recover reduced input tax credits equal to 75% or 55% (depending on the nature of the acquisition) of the GST component charged by the Manager on the Manager s Fees. 43

44 ADDITIONAL INFORMATION 8 44

45 ADDITIONAL INFORMATION Privacy Policy By applying to invest in the Trust you are providing personal information to Primewest. The Privacy Act 1988 (Cth) regulates the way in which Primewest collects, uses, keeps secure and gives people access to their personal information. Primewest is bound by the Australian Privacy Principles and will collect and store personal information from Unitholders in a safe and secure manner. Your personal information will be used to process your application and, if your application is successful, to administer and report on your unit holding and the progress of the Trust s activities. Your personal information may also be provided to other persons to enable Primewest to provide these services to you (e.g. service providers, consultants, and advisers), or to other Unitholders or to persons that you authorise to act on your behalf in relation to your investment (e.g. your financial adviser, accountant or lawyer). We may also disclose your personal information to others as permitted under the law. Your personal information will be added to a Primewest mailing list and used for future marketing of Primewest investment opportunities. A copy of our Privacy Statement is available at the offices of Primewest and upon request free of charge. Primewest collects, holds and uses your personal information to process your application, and if your application is successful, administer your unitholding in the Trust. Anti-Money Laundering and Counter Financing Terrorism Act Before Primewest can accept your application it will be necessary to provide certified photographic identification of your identity. 45

46 ADDITIONAL INFORMATION If you are making an application as a company, Trust or Superannuation fund, Primewest will require details of the registration of the entity and certified photographic identification of at least one of the Directors. If you are making an application as a Trust, Primewest will require an extract of the Trust Deed, details of the Trustees and beneficiaries of the Trust. Further details of the requirements may be obtained from Primewest. Third Party Payments The Manager may make payments to third parties as a result of your investment in the Trust. These payments must be disclosed to you by those third parties receiving any payment. If you believe that a third party has received payment as a result of your investment in the Trust and you have not received adequate disclosure please contact the Manager for clarification. Any payments made to third parties will be payable from the Managers Fees as detailed in section 9. Attached is a copy of the Trust Application Form. A copy of the Trust Deed is also available upon request. Should you wish to apply for Units in the Trust, please complete and return to us the Application Form with 10% of unit payment no later than Wednesday 16th December 2015 and Units must be fully paid by no later than Monday 25th January There are always risk factors associated with property investment some of which relate directly to the Property and some of which are economic and global in nature. Section 6 details those risks that are perceived by the Manager to be the most relevant but this list is not exhaustive as there may be other risk factors. There is a risk that forecast income is not achieved and a risk of capital loss is possible. Prospective investors should take these matters into consideration when considering their investment decision. 46

47 FURTHER INFORMATION If you require any further information on this property, please contact us:- Mark Vonic Chief Investment Officer Mob: Julian Lodge Chief Executive Officer Mob: John Bond Director Mob: David Schwartz Director Mob: Jim Litis Director Mob: Address: Level Murray Street PERTH WA 6000 Telephone: