IE EXCHANGE PREMIUM INVESTORS - PREMIUM OPPORTUNITIES Investors Exchange Fund ARSN 127384767 Product Disclosure Statement Part 2 23 & 25 Harrier Ave Development Offer Responsible entity: Investors Exchange Limited ACN: 116 489 420 AFS Licence: 299024 Foundation Project Management Pty Ltd ACN 617 171 829
Table of contents 1 Offer details... 4 2 Details of the Development and application of funds... 14 3 Property valuation... 20 4 How to invest in this Offer... 21 20170313 V1.0 Product disclosure statement Part 2 - Harrier Ave Development Offer
This Product Disclosure Statement (PDS) Part 2 is issued by Investors Exchange Limited ACN 116 489 420, AFS Licence 299024 (IEL, us, we or our) of 112 Siganto Drive, Helensvale 4212, Queensland, www.investorsexchange.com.au. This Part 2 PDS is dated 13 March 2017. This Part 2, and Part 1 with which it is distributed, make up the PDS for the offer of the Harrier Ave Development Class of Units in the Investors Exchange Property Development Fund ARSN 127 384 767 (Fund). Each part of this PDS must be read in conjunction with the other part. No part of this PDS should be distributed without the other part. Terms defined in Part 1 equally apply to this Part 2 unless stated otherwise. If you wish to participate in this Offer you should read the PDS, comprising Part 1 and Part 2, in its entirety. 20170313 V1.0 Product disclosure statement Part 2 - Harrier Ave Development Offer
1 Offer details Investment opportunity Class of Units Investment strategy Issue Price Minimum investment Minimum subscription Investment term Harrier Ave Development Units This is an opportunity for investors to participate in the Harrier Ave Development project by purchasing the Harrier Ave Development Class of Units. The Fund is seeking to raise funds for the purpose of acquiring land situated at 25 Harrier Ave, Loganholme, Queensland and a subdivided part of the adjacent property situated at 23 Harrier Ave (Property), obtaining a development approval to subdivide the existing property into four residential Lots while retaining the current residential property on the premises at 25 Harrier Ave for resale (Project). Further details of the Project, the Property and the Harrier Ave Development Units are set out below. $ 20,000 per Unit. One Unit per investor. Additional Units can be purchased with no limit. The Offer is seeking to raise $900,000 and there are 45 Units available under this Offer. The Offer will not proceed unless subscriptions are received for all Units. No further Units will be offered in this Class. Harrier Ave Development Units will be issued with a fixed term of 39 weeks, commencing on the date Units are issued. Prior to termination of the Units, the Development must be sold and proceeds distributed to investors. Refer to section 2.2 of Part 1 for details on what happens at expiration of the term and the circumstances in which the term may be extended. Offer open date 13 March 2017 Offer close date 3 June 2017 The closing date is indicative only. We reserve the right to close off the Offer early, extend the closing date, or withdraw the Offer without prior notice. Structure The Harrier Avenue Property Development Trust ABN 51 813 848 526 (the SPV) has been established to undertake the 4-lot subdivision (Development), including purchasing the Properties at 23 and 25 Harrier Ave, Loganholme, Queensland, with the property at 23 Harrier Ave being a subdivided portion of the existing property. 25 Harrier Ave has an existing home which will be renovated and resold as part of the development. A custodian has been appointed, Perpetual Corporate Trust Limited (ABN 99 000 341 533) which will hold the Property in a Trust of which the Custodian is the sole Trustee and the units in the SPV correspond to the Harrier Ave Development Class of Units. Funds raised under this Offer will be provided to the SPV for the purposes of undertaking the Development. 20170205 Product disclosure statement Part 2 - Harrier Ave Development Offer 4
Investment details Development overview and benefits of investing Delivering solid returns for our investors involves sourcing quality developments and looking beyond traditional techniques to a new generation of property investment. This has now created an opportunity for investors with patient money who want to join together, without the need for borrowings to take advantage of property development. Located at adjacent properties at 23 and 25 Harrier Ave Loganholme, Queensland, the Property involves 2 titles with a total area of 2387 sqm, (See site plan) with a current residential home, with 4 bedrooms and 2 bathrooms situated on the proposed Lot 4. The Properties and will be divided into 4 residential building Lots. The subdivision will realise 4 Lots, being approximately (lot numbers according to the site plan): Lot 2-506 sqm Lot 3-628 sqm Lot 4-679 sqm (with current existing dwelling) Lot 5-353 sqm The total number of lots created is fixed, however the exact size of each lot may vary due to design requirements during the DA process. The residential home on Lot 4 requires some renovation in order to ensure that it is in a prime saleable condition. All civil works will be undertaken and completed prior to sale. This includes excavation, site clearing and preparation, roads, water and sewerage, power, and communications. The sale of the residential allotments, including the current residential home will be through a licensed agent or by public auction. Property location Property description Site area Purchase price Approvals status Estimated total Development cost A subdivided portion of 23 Harrier Ave and 25 Harrier Ave, Loganholme QLD 4128. Portion of Lot 206 and all of Lot 207 on RP133850. 2387 sqm The purchase price for the 25 Harrier Ave is $550,000 for (no GST and excluding purchase costs) and $105,000 (no GST and excluding purchase costs) in respect of the subdivided portion of 23 Harrier Ave, which must be settled within 4 months from issue of titles. The Project requires development approval for the proposed subdivision and operational works and supply authority approval to undertake the civil works. No approvals have yet been applied for and will only be applied for following settlement of the Properties purchase. However, preliminary discussions with Logan City Council have been very encouraging and the Development Manager sees no impediment to obtaining all approvals required. All approvals necessary will be obtained prior to Project commencement but postcompletion of the Offer and issue of Units. $901,182 (inclusive of GST) This Development Cost does not include the Purchase Price in respect pf the Portion of Lot 23 in the amount of $105,000. It is expected that this amount will be funded from the sale of one or more lots prior to the due date for 20170313 V1.0 Product disclosure statement Part 2 - Harrier Ave Development Offer 5
settlement. If it is required to be paid prior to any lot being sold, it will be settled by the Development Manager out of its own funds with no encumbrance on the Properties and against the issue of further Harrier Ave Development Units to the Development Manager. This amount includes fees payable to the IEL and the Development Manager (excluding any performance fee payable to the Development Manager), and excludes Real Estate Agents Commission. Refer to section 2.2 of Part 2 for a breakdown of the Development cost. Estimated Development duration Estimated settlement date of Property Estimated date for lodgment of development approval application Estimated grant of development approval Estimated date for lodgement of operational works and supply authority application for approval Estimate date for grant of operational works and supply authority approval Estimate construction commencement Estimated construction completion Estimated Development completion Estimated Settlement Development Manager Approximately 39 weeks maximum from commencement of project. Lot 25-60 days from commencement of project Lot 23-4 months from the commencement of project. 2 weeks from commencement of project. 4 months from commencement of project. 6 weeks from development approval. 2 to 4 weeks from lodgement of operational works and supply authority applications. Within 14 days operational works and supply authority approvals. 8 weeks from commencement of construction. 39 weeks from commencement of project. 4 weeks from completion of construction. The appointed development manager is Foundation Project Management Pty Ltd (Development Manager), which is a privately-owned business whose 40162739v5 Product Disclosure Statement Part 2 - Harrier Ave Development Offer 6
core activity is land subdivisions, dwelling construction and residential unit development, with a growing specialisation in the planning and development of mixed use walkable townships. The principal/s of the Development Manager have over 25 years combined experience in the property development and project management industry. The Development Manager is entitled to receive various fees for the services it provides and these fees are summarised in section 2.1 of Part 2. Valuation An independent valuation of the Properties has not been obtained. The current market value of the Property has been assessed by the Development Manager. The assessment of the property is deemed to be appropriate based upon the current sales in the area for properties similar to the proposed lots and based upon the experience of the Development Manager. Site Plan Site view from Street Market commentary Loganholme is located on the eastern side of the South-East Freeway and is 25 mins from the CBD by road or 45 mins from the Gold Coast. This is an infill suburb meaning there is no new land being released in the foreseeable future. 20170313 V1.0 Product disclosure statement Part 2 - Harrier Ave Development Offer 7
The only sites for new land are existing lots that are sub-divided. The surrounding suburbs are Cornubia, Shailer Park and Tanah Merah. The average sale prices for vacant land in surrounding suburbs are listed below. (Source: www.pricefinder.com.au 17 Feb 2017) Comparable Sales The image below shows some indicative comparable sales and their locations in the area. Cornubia (4130) Shailer Park (4128) Loganholme (4129) Tanah Merah (4128) Vacant Land Vacant Land Vacant Land Vacant Land # $ # $ # $ # $ 2016 24 380k 10 311k 37 272k 3 305k In 2011, the population of Logan was 6,124 with the main age group being people between 30 and 39 years of age. The largest segment of the population is full time, and in general those in employment work as technicians and trades people, with most travelling to work by car. The median weekly income of the largest segment of the population is $1,000 to $1,499. The median sales price for houses in Loganholme QLD in the last year was $415,000 based on 135 home sales. Compared to the same period five years ago, the median house sales price for houses increased 17% which equates to a compound annual growth rate of 3.4%. Sales in the last 12 months indicate strong demand for vacant land and established houses in Loganholme and the surrounding area. Harrier Avenue has the benefits of being located in a quiet no through road whilst still being within 5kms of major shopping centres including the Logan Hyperdome, schools, a University Campus and major transport Corridors North South and West. Vacant land in Loganholme is still better priced than the surrounding suburbs and this makes it very attractive to first home buyers, investors and project home builders looking for sites. Application of funds Section 2.2 of Part 2 summarises how funds raised under this Offer will be utilised. Key investor information Borrowings Gearing ratio Interest cover ratio Related party disclosure Not applicable. The funds raised under this Offer will be sufficient to fund the purchase of the Property and construction of the Development. Not applicable. The Development, including the purchase of the Property, will be funded via funds raised under this Offer and this Class will not have a gearing ratio. Not applicable. The Development will be funded by funds raised under this Offer and this Class will not have an interest cover ratio. The vendor of the Property and the Development Manager are not related parties of IEL or the Custodian. 40162739v5 Product Disclosure Statement Part 2 - Harrier Ave Development Offer 8
Distributions Withdrawal rights Net tangible assets It is not expected that distributions will be paid during the term. However, prior to the expiration of the term, all Class Assets attributable to the Harrier Ave Development Units, specifically the Development, must be realised and the net proceeds (after payment of fees and costs, including fees payable to IEL and the Development Manager) distributed to investors. If any net income attributable to the Harrier Ave Development Units is earned by the Fund during a financial year prior to end of the term, we will distribute that net income proportionally to investors holding Harrier Ave Development Units. You will not be able to redeem your Harrier Ave Development Units prior to expiration of the term. However, you may transfer your Units subject to the conditions described in section 2.4 of Part 1. The NTA value per Unit will be $18,694 upon completion of the Offer and purchase of the Property at 25 Harrier Ave, after payment of the fees and expenses associated with the Offer and purchase including Legal Fees, IEL s application fee and establishment costs, the Development Manager s Acquisition fee and payment for option assignments, and Property stamp duty and registration fees (with all costs and fees calculated ex-gst as appropriate). The NTA value is calculated as the anticipated value of the assets of the Harrier Ave Development Class (being the Property and residual cash after payment of purchase expenses and Offer costs divided by the number of Units offered in this Class). 20170313 V1.0 Product disclosure statement Part 2 - Harrier Ave Development Offer 9
Fees and other costs of IEL and Offer Fee Description Amount Upfront fees payable when Units are issued IEL s application fee IEL s establishment costs Legal Fees IEL will be paid an application fee of 2.2% (including GST) of the Issue Price of each Unit. The application fee will be paid from funds raised upon the issue of Units. Refer to section 7 of Part 1 for further information about the application fee. The estimated total establishment costs associated with this Offer, including IEL s application fees are incorporated in the Issue Price of Units and will be paid upon the issue of Units. The estimated legal fees for the establishment costs of the Offer are $5,500 including GST for the establishment of the SPV and all documentation. Ongoing fees payable during the term of the investment IEL s management fee IEL will be entitled to a management fee of percentage 2.2% per annum (including GST) of the Gross Asset Value of the assets of the Harrier Ave Development Class, calculated and payable monthly in arrears for the period commencing on the issue of Units and ending on the earlier of: (a) 6-9 months; or (b) completion of sale of the 4 Lots. Refer to section 7 of Part 1 for further information. Fees and costs not applicable to this Offer Performance fee Expense recovery Commission We will not be entitled to receive a performance fee in connection with this Class. We will not recover any expenses associated with the Offer from the Fund, apart from the establishment costs, legal fees and custodian fees mentioned above. We will meet the cost of usual operating expenses associated with this Offer from the application fee, establishment costs and management fee which we receive. It is not anticipated that there will be any abnormal expenses, as all anticipated expenses are included in the Project feasibility. However, should the Fund, Class or Project incur abnormal expenses (for example, expenses associated with litigation proceedings or enforcement activities or convening investor meetings) IEL is entitled to recover these from the Fund. Neither we, nor our related entities, receive a commission from the vendor in connection with the acquisition of the Property. $440 (including GST) per Unit. $20,000 (including GST) Estimate $5,500 (including GST) $1,614 (including GST) per month, assuming a Gross Asset Value of $900,000 for the Class, being the Offer proceeds less IEL s application fee. Not applicable. Not applicable. Not applicable. 40162739v5 Product Disclosure Statement Part 2 - Harrier Ave Development Offer 10
Additional information Promoter Material agreements specific to this Offer Risks Investors Exchange Ltd will be the distributor of this Offer. IEL may appoint other licensed or authorised financial advisers to market and sell the Offer and will provide training to such advisers on the Fund and the Offer. We, on behalf of the Fund, have arranged, or will arrange, for the SPV to enter into the following documents relating to the Development: (a) Property purchase contracts; (b) Responsible entity and development services agreement; (c) Sales and marketing agreement; (d) Development Agreement with Development Manager; and (e) Civil works contracts. The purpose of these agreements, or proposed agreements, is discussed in section 2.3 of Part 2. Refer to section 9 of Part 1 for a summary of material agreements applicable to the Fund generally. In addition to the risks set out in section 6 of Part 1 which apply to this Offer and should be considered by investors, the following specific risks apply to an investment this Class: Valuation risk The Development Manager has assessed the current market value of the Property on an as is basis. We have not obtained an independent valuation of the Property on an as if complete basis assuming completion of the Project. Therefore, there is a risk that the value of the completed Project, namely the price at which the subdivided lots can be sold for, may be less than the total of the purchase price of the Property, Development costs and fees payable to IEL which would result in investors suffering a loss on their investment. Development approval risk While favourable preliminary discussions have been undertaken with the planning department of Logan City Council, there is a risk that the required approvals will not be able to be obtained, will take longer to obtain than anticipated or that the proposed subdivision could be required to be adjusted in some way. If the proposed Project requires modification (for example, a smaller number of lots), if the approvals are subject to conditions not currently contemplated (such as contributions to roads or other public infrastructure) or if the approvals take longer than anticipated to obtain it may reduce the revenues earned from the sale of the residential Lots or increase the costs of the Project which will reduce the returns (if any) to investors and the adversely impact the performance of an investment in this Offer. If the required approvals cannot be obtained, the Project would not proceed, the Property would be sold, net proceeds returned to investors and Harrier Ave Development Class terminated. This would likely result in a capital loss for investors as the Class will have incurred fees and costs (such as IEL s application fee and establishment costs) which are not recoverable. 20170313 V1.0 Product disclosure statement Part 2 - Harrier Ave Development Offer 11
Further, if the sale price the SPV achieves for the Property is less than the purchase price it would increase the loss suffered by investors. Civil works contract At the point of issuing this PDS a civil works contract had not been entered into or civil contractor appointed. However, licensed contractors have been requested to provide quotations for the work required. There is a risk that the cost of the works required will exceed the figure budgeted for in the Project feasibility. However, a generous contingency of over $20,000 has been incorporated into the budget. There is also a risk that actual construction costs will be higher than those agreed with the appointed contractor (for example, if variations are required to the Project beyond the scope to be provided in the contract or if the appointed contractor becomes insolvent and a new contractor is appointed to complete the works) which would adversely impact the profitability of the Project and any investment returns paid to investors. Funding risk The Offer proceeds have been calculated, based on the expected cost of the Project, including the purchase price of the Property, construction and approval costs and fees payable to IEL and the Development Manager. If the cost of undertaking the Project is higher than anticipated and budgeted for, IEL may need to raise further capital from investors or obtain borrowings. Either event may impact the returns received from the Project. Further, if additional funds are required and IEL is unable to raise capital or obtain borrowings, IEL may be unable to proceed with the Project which would require IEL to sell the Property, terminate the Class and return residual proceeds to investors (which may be less than the initial capital invested). Application of GST margin scheme The purchase price of the property does not include GST, as the sellers are not GST registered. The margin scheme for GST will apply to the sale of lots by the SPV. There should also be no GST on the sale of Lot 4 which includes the existing residence, as this is existing residential premises. There is a risk the Australian Taxation Office may determine that the margin scheme cannot be applied to the sale of the Lots by the SPV. If such determination was made, then, the SPV will be liable for the additional GST liability, being the difference between GST on the entire sale price and the GST paid on the margin. If this additional liability arose it may adversely impact the construction time frame, the Development s profitability and the performance of an investment in the Harrier Ave Development Units. Consents The Development Manager has given, and not withdrawn, its consent to be named as Development Manager in the form and context in which it is named and for the inclusion of the following information in the form and context in which it is included: (a) the statements attributed to the Development Manager regarding the likelihood of obtaining approvals for the Project, as set out in the row headed Approval status in section 1 of Part 2; (b) the statements attributed to the Development Manager regarding the market assessment of the Property on an as is and if complete basis; (c) details of the Development Manager s experience of its principals, as set out in the row headed Development Manager in section 1 of Part 2; (d) the statements attributed to the Development Manager regarding the 40162739v5 Product Disclosure Statement Part 2 - Harrier Ave Development Offer 12
(e) obtaining of permits under the paragraph headed Planning in section 2.1 of Part 2; and the construction and development costs for the Project contained in section 2.2 of Part 2. The Development Manager has not caused or authorised the issue of the PDS and takes no responsibility for the PDS other than the inclusion of the statements listed above. Application Process Who may invest in this Offer? How do I invest in this Offer? Individuals, self-managed superannuation funds, and companies or trusts may participate in this Offer and apply for Units. To invest in this Offer, simply read the PDS, comprising Part 1 and Part 2, for the Fund in full and then: (a) complete, sign, and detach the Application Form at the back of this Part 2 or download a copy of the PDS and Application Form from our website www.investorsexchange.com.au; and (b) pay your application moneys by EFT and send your Application Form to us at the address shown on the Application Form. Bank account details are located on the Application Form and instructions for EFT are contained in the guide accompanying the Application Form. Contact us on 1300 737 903 or international + 61 7 5532 1054 or email info@investorsexchange.com.au if you wish to discuss this Offer. 20170313 V1.0 Product disclosure statement Part 2 - Harrier Ave Development Offer 13
2 Details of the Development and application of funds 2.1 Development details The purchase price of the Property is $655,000 (no GST). Total Development costs, including the purchase price, purchase costs, construction and development management costs (excluding any performance fee payable to the Development Manager), and fees payable to IEL are estimated at approximately $1,039,957 (including GST). General The Property is located at part of 23 Harrier Avenue and 25 Harrier Avenue, Loganholme, QLD 4129. The site generally slopes towards the street although some overland flow will be directed to the rear of the property. Sewer, water and stormwater connections are all located in the road reserve adjacent the property. A similar scale development is currently being completed at 19 Harrier Avenue and 2 other sites are either completed or close to completion in the general vicinity. The approvals already granted and the sale prices achieved for these sites support the Development Manager s view that this is a viable site. Planning The development approval and any other approvals required to undertake the Development have not yet been applied for or obtained but will be obtained prior to commencement of the Project (but after completion of the Offer and issue of Units). Once the development approval is obtained, construction approvals, such as operational works and supply authority approvals, are required prior to the commencement of construction. The Development Manager has already carried out significant due diligence and is of the opinion that all of the necessary permits will be forthcoming within statutory time frames, which are reflected in the Development time frame set out the Investment details section in section 1 of Part 2. Refer to the row headed Risks in the Additional Information part in section 1 of Part 2 for a discussion of the potential risks if the approvals required for the Project are not obtained. Proposed Development Harrier Ave Residential Development presents an opportunity to invest in the development of the 4-lot subdivision including purchasing the Properties at 23 and 25 Harrier Ave, Loganholme, Queensland, with the property at 23 Harrier Ave being a subdivided portion of the existing property. 25 Harrier Ave includes an existing home which will be renovated and resold as part of the development. The Property spans two titles with a total area of 2387 sqm, and will accommodate 4 residential Lots, approximately as follows (lot numbers according to the site plan): Lot 2-506 sqm - building Lot; Lot 3-628 sqm - building Lot; Lot 4-679 sqm - with a current residential property, which is proposed to be renovated as part of the Development; Lot 5-353 sqm - building Lot; The Property is zoned residential and represents a good opportunity to develop and sell residential lots into a highly-constrained marketplace and will benefit from: a local council that is generally known to Product disclosure statement Harrier Ave Development Offer 14
be supportive of development; recent similar projects in the area; and strong recent sales of directly comparable product. The Project will be managed by Foundation Project Management Pty Ltd (the Development Manager) The Development Manager will be entitled to receive the following fees for managing the Project: a. the acquisition fee of $15,125 (inc GST) upon commencement of the Project; b. the reimbursement of related costs prior to the commencement of the project which would otherwise have been disbursed by the SPV; c. a development management fee of 4.4% per annum (including GST) of the total Invested Funds, is payable monthly; d. the Development Manager will take a performance fee of 20% plus GST calculated on the net profit in respect of the development and the rest of the profit from the Project will be shared between class unit holders of the Fund (via the SPV). Profit is calculated as the gross proceeds received from the sale of the residential Lots less all fees and costs of the Project (including IEL s fees, the Development Manager s fees, agents fees on the sale of the Lots, construction costs and the purchase price of the Property). The performance fee is calculated and payable upon completion and sale of the Development. e. Reimbursement of $2,100 (inc GST) paid by an associated company, being option premiums over the two properties at 23 & 25 Harrier Avenue (with the ex-gst amount of $2,000 being offset against the purchase price of the properties). Development costs Refer to section 2.2 of Part 2 for a breakdown of the Development costs and details of the extent to which these costs will be met from funds subscribed by investors under the Offer. 2.2 Expected Development costs and source of funding The following table sets out the expected cost of the various components of the Development and how the Development costs will be funded. Construction, development and other cost estimations have been provided by the Development Manager based upon previous experience and available information. Development costs are based upon a number of key assumptions as detailed below. Whilst these assumptions have been based on information available at the date of this PDS, and due care and attention has been exercised in preparing the summary, they may not reflect actual future events. To this end, you should consider the Development costs contained in this section with the risks discussed in section 6 of Part 1 and the row headed Risks in the Additional Information part in section 1 of Part 2 and, where necessary, seek further advice on any item you are unsure about. Agent fees on the sale of the subdivided residential Lots are not included in the total expected Development costs as these fees will be paid from the sale proceeds of each Lot. All marketing expenses have been included in the total expected Development costs. 40162739v5 Product disclosure statement Part 2 - Harrier Ave Development Offer 15
Development costs Item Estimate Description Property purchase costs $583,900 for 25 Harrier Ave and $105,000 for the portion of 23 Harrier Ave. Includes GST where relevant, conveyancing on purchase settlement and estimated Acquisition fee payable to Development Manager and Stamp Duty Fixed and expected amounts Construction costs $108,000 (including GST) Estimate Development management and consultant costs $49,700 (inc GST) Estimate: Assuming project runs for 9 months Property holding costs $6,659 (inc GST) Expected amounts Statutory fees and contributions $84,000 council contributions Exact number defined at payment date Professional fees $53,323 (inc GST) Fixed and expected amounts Other (incl. contingency) $49,375 (inc GST) Estimate Total inc GST $1,039,957 (inc GST) Estimate GST reclaimed $16,898 Estimate Total ex reclaimed GST $1,023,059 Estimate Source of funds Item Amount Offer proceeds $900,000 40162739v5 Product disclosure statement Part 2 - Harrier Ave Development Offer 16
Development costs Item Estimate Description Total $900,000 Key financial assumptions The following provides a further breakdown of the above items and the assumptions underlying the cost amounts. Property purchase The purchase price is as specified in the Property Purchase contracts to be entered into upon exercise of the options over the Properties as follows: a. 25 Harrier Ave- to be settled out of the proceeds of the funds raised in terms of this Offer; b. 23 Harrier Ave- to be settled out of the proceeds of the funds raised in terms of the sale of one or more lots in the Development, failing which it will be funded by the development manager from its own funds, against the issue of commensurate Harrier Ave Development Units. Property purchase costs These costs comprise stamp duty, registration fees and legal fees. Stamp duty and registration fees are based on current rates and the legal fees estimate is based on a quote and the acquisition fee payable to the Development Manager is as disclosed. Construction cost The construction cost estimate, encompassing civil works and construction costs, is based on the Development Manager s previous experience. Development management and consultant costs Development management costs represent the amount payable to the Development Manager, being the development management fee of $29,700 (inc GST), assuming that the project runs for 9 months. The development management costs do not include the performance fee which may be payable to the Development Manager depending on the performance of the Project and the acquisition fee. Refer to the paragraph headed Proposed development in section 2.1 of Part 2 for further details. The amount payable to, and rights and obligations of, the Development Manager are contained in the responsible entity and development services agreement between IEL, the SPV and Development Manager, the material terms of which are summarised in section 2.3 of Part 2. The Development Manager has budgeted $20,000 for the costs of various consultants which will be engaged to provide services for the Project, including an architect, surveyor and engineer. This amount is based on the Development Manager s previous experience. 40162739v5 Product disclosure statement Part 2 - Harrier Ave Development Offer 17
Property holding costs Land holding costs comprise council rates and water and sewerage charges and are based on current rates and water, sewerage notices from the local council and land tax. Statutory fees and contributions Statutory fees and contributions cover headworks, registration and approval application fees and are based on the fees currently charged by the local council. Professional fees Professional fees comprise IEL s application fee of $19,800 (including GST), IEL s management fee of $14,523 (including GST and assuming an investment term of 9 months with the entitlement to the management fees commencing on the issue of Units), Custodian fees estimated at $1100 (inc GST), Legal Fees of $5,500 (inc GST) and Accounting Fees of $4,400, plus conveyancing costs on the sale of the Lots, estimated at $8,000 (inc GST). Other Other expenses include any other professional fees, expenses associated with the marketing of the subdivided lots for sale and a $20,000 contingency allowance, and are based on the Development Manager s previous experience. Sales commissions for sale of lots will be deducted from final sale proceeds and do not require funding. Source of funds The Development costs will be funded from the proceeds raised under this Offer. Development costs will be incurred upon completion of the Offer (with some reimbursement to the development manager for costs already incurred), settlement of the Property purchase, during the construction phase and upon sale of the residential Lots. The Development Manager will provide the purchase price of the portion of Lot 23, Harrier Ave, against the issue of commensurate value in Harrier Ave Development Units, in the event of there not being sale/s of Lot/s sufficient to meet the purchase price of 23 Harrier Ave. 2.3 Material agreements Property purchase contract and option The right to purchase the Property is secured by two call options dated in favour of an associated company of the Development Manager. Exercise of the options by the Development Manager is subject to the Development Manager being satisfied with all aspects of the Properties and the options may be exercised at any time prior to 26 June 2017. It is intended that the Development Manager will assign the options for the benefit of the SPV upon successful completion of this Offer. The option premiums paid to the vendors by the Development Manager s associated company will be reimbursed to the Development Manager by the SPV, in the aggregate amount of $2,100 (inc GST). The ex-gst amount of $2,000 will be deductible from the purchase price of the properties. The contracts are annexed to the options and upon exercise of the options the contracts to purchase the Property will come into effect. The main terms of the contracts are summarised below. 40162739v5 Product disclosure statement Part 2 - Harrier Ave Development Offer 18
Matter Description Purchase price 25 Harrier Ave- $550,000 23 Harrier Ave - $105,000 GST Settlement The purchase price of the property does not include GST, as the sellers are not GST registered. The margin scheme for GST will apply to the sale of lots by the SPV. There should also be no GST on the sale of Lot 4 which includes the existing residence, as this is existing residential premises. 25 Harrier Ave - 28 days from the contract becoming unconditional 23 Harrier Ave - 4 months from the contract becoming unconditional. Responsible entity and development services agreement IEL, the SPV and Development Manager have entered into the responsible entity and development services agreement pursuant to which, among other matters, the Development Manager is engaged to provide services for, and manage, the Development (including arranging for development approval and the operational works and supply authority approval applications to be prepared, lodged and managed) and deliver it in accordance with the Development costs summarised in section 2.2 of Part 2. The agreement also recognises the Development Manager s role in sourcing the Property and undertaking due diligence on the Development. The agreement may be terminated by the SPV if, in the SPV s reasonable opinion, the Development Manager fails to deliver the services it is engaged to provide in a timely and professional manner or with the degree of care, skill and diligence which a reasonable person in the Development Manager s position would exercise. The agreement may also be terminated by a party in a number of circumstances set out in the agreement including if another party becomes insolvent or ceases to carry on business, breaches its obligations under the agreement and fails to remedy the breach after being notified to do so, is subject to a change in control without the consent of the other parties, or if IEL s AFSL is cancelled or suspended or the Fund is terminated. Pursuant to the responsible entity and development services agreement, the Development Manager will be entitled to an acquisition fee, a development management fee and, if the Project generates a profit, a performance fee. Refer to the paragraph headed Proposed development in section 2.1 of Part 2 for further details. Civil works contract It is proposed the SPV will enter into a contract with a civil contractor for construction of the Development. The contract is expected to be, or similar in content to, in the form of AS 4000-1997. We will ensure the civil contractor appointed by the SPV is appropriately licensed and sufficiently experienced to undertake the Development. 40162739v5 Product disclosure statement Part 2 - Harrier Ave Development Offer 19
Sales and marketing agreement No sales and marketing agreement has been entered into at the date of the PDS. A sales and marketing agreement is intended to be entered into appointing a marketing group and agent to facilitate the sale of the Lots. Commissions payable to an agent for the sale of the residential Lots are estimated to be $29,375 (inc GST) in total for the Lots. 3 Property valuation Information upon which the value of the Property is based is set out below. Market value assessment details Matter Basis of Assessment Assessment Approach Description Assessment is conducted on an unencumbered, freehold and vacant possession basis (i.e. as is ). The Property was assessed using the Direct Comparison and Hypothetical Development Approaches. Land area 2387 m 2. Property description Registered Plan: Lots 206 and 207 on RP 133850 Zoning/Land use Definitions Term Direct Comparison Hypothetical Development Approach Market value The Property is zoned Low Density Residential Suburban Precinct. This zone has a minimum lot size of size 350sqm and an average lot size of 500sqm under the Logan Planning Scheme 2015. A development approval application will need to be lodged in order to approve the properties to be subdivided. Meaning An assessment methodology whereby meaningful comparisons are made between the subject and identified recent recorded and reported sales of similar zoned development land within the immediate and surrounding region. A assessment methodology whereby various development parameters are analysed over the length of the project, based on input assumptions into the cash flow. The purpose of the methodology is to assess the returns, risks and viability of the project. Market value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm s length transaction after proper marketing, wherein the parties had each acted knowledgably, prudently and without compulsion. 40162739v5 Product disclosure statement Part 2 - Harrier Ave Development Offer 20
4 How to invest in this Offer Read the PDS, comprising Part 1 and Part 2, for the Fund in full then: (a) (b) Complete and sign the Application Form provided or download a copy of the PDS and Application Form from our website www.investorsexchange.com.au; and pay your application moneys by EFT and send your Application Form to Investors Exchange Limited at the address shown on the Application Form. Bank account details and instructions for EFT are contained in the guide accompanying the Application Form. We request that you use the last four digits of the applicant entity s tax file number as a reference number if paying by EFT. In the case of a joint application, please use the last four digits of the tax file number of the first named applicant. Contact us on 1300 737 903 or + 61 7 5532 1054 if you wish to discuss this Offer. 40162739v5 Product disclosure statement Part 2 - Harrier Ave Development Offer 21
40162739v5 Product disclosure statement Part 2 - Harrier Ave Development Offer 22