Taking a share in Property

10 November, 2010

As mentioned in my last GLOBAL VIEW, equity participation is now becoming a viable – and often preferable – alternative to refinancing existing loans. To see this issue click here

I said I had examples where I’ve been able to offer this alternative which offer excellent returns to private investors and do not require personal guarantees. So in response to a number of enquiries I thought I’d briefly describe them in this special edition of GLOBAL UPDATE. I’ll send my November GLOBAL VIEW next week.

Both, for various reasons, have been structured as share investments.

 

Commercial property – Remuera medical mile

 

The opportunity is to purchase up to a half share of the ownership of a commercial building in Remuera Rd, Auckland, the tenants of which are medical professionals. This is a landmark primary healthcare centre in an area commonly known as the Medical Mile.

 

The completed building was bought from a distressed vendor at a very competitive price under valuation. The current owner has completed all requirements to obtain the Code of Compliance.

 

The owner is offering a 50% share in the special purpose company that owns the property to an investor or investors. Features of the offer include.

 

  • Brand new building with full code of compliance and 83 car parks.
  • Contains special surgical facilities.
  • 75% of available tenancies have been signed up with an average term of 8.3 years.
  • Rent increases on 3 yearly reviews at higher of market or CPI.
  • Bank finance will be 40% of valuation and the investor will not be required to give a personal guarantee to the bank.
  • Entry price plus estimated cost to fully tenant is $2 million under fully tenanted valuation.
  • Tax losses carried forward shelter income for first 3 years giving tax paid returns up to 11.5%.

 

 

Established residential subdivision – terminating investment

 

The opportunity is to invest in a company established in 2005 as a specialised residential land developer to subdivide rezoned orchard land. It is now the largest single developer in the area and the largest single land owner.

 

To date they have developed 120 individual residential sites of which 99 have been sold and settled. They also own 10.5 hectares of adjacent land which will be developed over the next 5-6 years and will produce a further 173 sections. Projected revenue from the project is over $30 million.

 

The company has existing bank facilities and is looking to raise $1 million to assist in financing the future development of by the issue of Preference shares which will have following characteristics.

 

  • The Preference shares are being issued at 20 cents per share and pay an annual interest rate of 7%. They will convert to Ordinary shares on a 2:1 basis on 31 March 2014.
  • On subscription (because the Preference shares rate above the Ordinary shares) the Preference shareholders will enjoy an asset cover per Preference share of $1.42.
  • The offer is a “Terminating” investment with all capital and profits having been returned to shareholders by the end of the 2015 financial year or sooner.
  • The asset backing of the Ordinary shares (being the value of the assets less the debt owing on them) before the issue of the Preference shares is 50 cents per share.
  • The asset backing of the Ordinary shares on conversion (based on the value of the developed and undeveloped land left) is projected to be 72 cents per Ordinary share (36 cents per Preference share subscribed).
  • The projected pre-tax return is 54.7 cents per 20 cent Preference share subscribed.
  • The projected pre-tax Internal Rate of Return on the Preference shares is 25.3% p.a.

Restricted Private Placements

 

Both the above are available only to “Eligible Persons” as defined in the Securities Act. To see the definition of an Eligible Person click here
A copy of an Information Memorandum describing each offer is available on signing a confidentiality agreement.

 

So if this appeals to you – or if you too are looking for equity participation in your business – why don’t you reply to this email or call me on mobile 021 902 004 for further information.
Cheers

JP

John Paine
Global Pacific Corporation Limited
112 Gladstone Road, Parnell,
P O Box 3229, Auckland, New Zealand
Phone +64 9 303 3700, Fax +64 9 303 3031
Mobile +64 21 902 004
Email john.paine@globalpacific.co.nz
Web site www.globalpacific.co.nz

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