What Due Diligence do you do prior to purchase?
Properties & Pathways Pty Ltd complete an extremely thorough Due Diligence examination of the property to protect each investors interest and to mitigate investor risk wherever possible. Our typical Due Diligence includes:
- Review and legal advice on all leases. This includes thorough examination of lease options, lease length, general and specific terms of the lease and any onerous or adverse conditions etc., particularly anything which may affect the property cash flow or value
- Review and understanding of neighbouring tenants and tenant composition
- Review and understanding of market rents in the area
- Structural integrity of the building and machinery including: engineering report, survey, machinery report, air-conditioner report, roof and awnings report etc.
- Traffic report and understanding of demographic
- Valuation report from a qualified and independent valuer (on the banks panel)
- Discussion with the local council to assess any future development in the vicinity which may adversely or positively affect the prospective property
- Tenant history including arrears schedules, aged debtors, tenant turnover etc.
- Property history including vacancy rates, historical repairs & maintenance expenditure etc.
- Inspection and viewing of the property for location, convenience, ease of access, traffic flow etc.
As you can see there is no short cut to Due Diligence. Rather a little caution than a big regret.
What structure do you use to purchase each property?
Each property is purchased in a separate unit trust with a corporate trustee (Properties & Pathways Pty Ltd). This is the most tax effective structure for property acquisition which minimizes land tax liability.
More importantly, it ensures each syndicate operates separately and distinctly from one another to prevent the cross-collaterisation of debt and to protect each individual investors assets.
Effectively, any investor purchases units in the unit trust which secures a direct ownership of the property in proportion to your investment amount.
Who makes decisions regarding each property?
The trustees (Properties & Pathways Pty Ltd) make all the management decisions to maintain and grow the value of the property. Having a vested interest in the property means you can absolutely guarantee the trustees will make the most astute decisions to protect their investment.
Properties & Pathways Pty Ltd also maintains a ‘reserve fund’ to shield investor returns from immediate threat. It allows them a solid buffer to efficiently mitigate the risk of tenant vacancy, economic downturn, capital and/or structural requirement whilst also allowing them to swiftly take advantage of value-add opportunities as/when they arise.
While the reserve fund is not a fail-safe, it certainly buffers investors from immediate shock and adverse conditions which can happen from time to time.
Once I invest, how can I get out?
At any time during the life of the syndicate, each investor (unit holder) may offer his units for sale in order to ‘get out’. The only prerequisite in doing so is he/she must first offer their units to the existing unit holders. This ensures the existing unit holders have the first opportunity to increase their unitholding before inviting a new party into the unit trust.
The Trustee (Properties & Pathways) will manage the sale/purchase of units at all times to protect the price of everyone’s investment. As the trustees are also unit holders, it’s in their interest (and also the interest of each investor) to keep the price of the units consistent with the value of the property (i.e. as high as possible). Normal commissions will apply for the trustees’ service/expertise in this regard – typically 1% but subject to change.
We generally have new and previous investors waiting to invest in the next syndicate who may be willing to acquire an existing unitholding given the chance.
How much can I invest?
There is no upper limit to investment, however, the cost of the property will ultimately determine how much is necessary in order to secure it. Properties & Pathways always gives preference to repeat investors (to reward their continuing loyalty) after which they accept investment parcels on a first come first serve basis.
What is the minimum amount I can invest?
The minimum investment parcel is $200,000.00*
This is subject to change, dependent on the property being syndicated. As such, we reserve the right to change the minimum investment threshold at any time without prior notice.
Can anybody invest with Properties & Pathways Pty Ltd?
You need to be a “wholesale investor” to facilitate an investment with Property and Pathways Pty Ltd. You will meet the eligibility criteria of a wholesale investor if you:
- Have assets of at least $2.5 million; or
- Have had an income of at least $250,000 per annum over the past two years; or
- Control a company or trust which meets the requirements of either item 1 or 2 (above); or
- Invest over $500,000 into one of Properties & Pathways syndicates.
Please advise if you do not meet these criteria as we are eligible for exemptions in particular circumstances and are willing to maintain flexibility for potential long-term investors.
What do I need to Invest?
You will need to complete and supply the following documentation to invest:
- Copies of Personal Identification (Driver’s license will suffice for Australian citizens and Passport for foreign citizens)
- Investor Details Form
- Application for Units
- Accountant’s Certificate – certifying you (or your company, SMSF or Trust) are a wholesale investor (as outlined above).
Documentation can be requested by emailing us on email@example.com
What is an AFSL?
AFSL stands for “Australian Financial Services License”. Properties & Pathways Pty Ltd have been granted a specific license from ASIC (Australian Securities & Investment Commission) based on many years of prior experience and expertise managing substantial commercial assets across Australia. The AFSL allows them to raise money from wholesale investors in order to acquire and manage commercial property on their behalf.
How often are you audited?
Properties & Pathways Pty Ltd is audited in terms of its AFS License and also in respect of its accounting practices. These audits are conducted once a year which rely heavily on the quarterly compliance reviews completed by external compliance contractors. This is a time consuming and costly exercise. However, it is absolutely necessary to ensure there are no conflicts of interest and furthermore, to ensure investors are at ease with their investment in the knowledge they are being handled with due care and professionalism.
Will I receive all tax return documentation?
Yes. Properties & Pathways Pty Ltd contracts an external accountant who completes an audit and compiles all tax return information at the end of each financial year which will be distributed to each investor in a timely manner.
Is my personal information protected?
Absolutely. Properties & Pathways Pty Ltd are governed by the Privacy Act at all times.
Can Self-Managed Superannuation Funds (SMSF’s) Invest?
Yes please. In fact, a large percentage of repeat investors are near retirement age and therefore use their Self-Managed Superannuation Funds as an effective investment vehicle to shelter them from tax. Each syndicate meets the criteria of the SIS Act and therefore is an effective investment vehicle to capitalize on tax effective cash flows and capital growth.
Can international companies, trusts and individuals invest with Properties & Pathways Pty Ltd?
Absolutely. Properties & Pathways Pty Ltd have already facilitated international investment from foreign parties, particularly from South Africa and Britain. They have also identified the most tax effective structuring for foreign investment to ensure the best possible return for each investor, regardless of residency.
How long is the life/length of each syndicate?
Each syndicate is established with an approximate life span. Typically, our syndicates range from 4-7 years. Having said this, each syndicate is assessed on its own merits and any potential to realise maximised value is constantly assessed throughout the life of the asset.
Many factors are considered before any asset is divested. These include, but are not limited to:
- Tenant composition and length of tenure
- Rental platform
- Interest rate fluctuations
- Property market conditions
- Economic conditions
- Regulatory and or legal changes
- Environmental and/or planning risk
- Leasing updates
- Capital expenditure
- Unsolicited offers
Do you charge ongoing fees?
We apply a once-off establishment fee calculated at 3.50% of the Purchase Price of the property.
This is our fee for establishing the syndicate, raising funds, structuring finance, completing the Due Diligence investigations, administering the legal framework, setting up the trust and implementing all property expertise in order to acquire the property.
After this up-front fee, we do not charge any ongoing fees for the life of the asset. Below are those fees which are characteristic of other syndicators:
- Establishment fee: Similar to us the other syndicators charge a fee to establish the syndicate, secure the asset, raise the equity, organise the bank finance, complete and satisfy themselves of the Due Diligence etc. We charge this
- Trust management fee: An ongoing fee to effectively manage the monthly or quarterly distributions of the trust. We don’t charge this
- Asset management fee: An ongoing fee (over and above the managing agents fee) to control the asset and ensure it maintains and/or increases its value. We don’t charge this
- Leasing fees: A fee (over and above the leasing agents fee) for efforts/time in securing a new tenant and/or filling any vacancies. We don’t charge this
- Renewal fee: A fee for negotiating option renewals or other terms with an existing tenant. We don’t charge this
- Development fee: A fee (over and above any project management fees) for any substantial capital works which take place. We don’t charge this
- Sale fee: A few (over and above the selling agents commission) for negotiating the successful sale of the property. We don’t charge this
- Success fee: An additional (and very aggressive) fee for achieving results above a certain threshold. i.e. if they deliver more than an average of 14% per year over the life of the syndicate once it’s sold, then they take 50% of every dollar above 14%. We don’t charge this
- The list goes on, however, the above fees are understood to be an industry standard.
Rather than charge these ongoing fees, we own a minimum mandated 25% of each asset and thus derive 25% of the rental income from the property. This is the most transparent way to manage the asset. This structuring ensures every dollar of value we derive from astute management is another 25c to us and likewise every dollar lost is 25c we have forfeited together with the investors.
This means each investment/acquisition has to prosper AND each investor has to prosper in order for us to succeed and grow. It ensures the most complete alignment of our interests to those of our investors. The other reason we like the establishment fee approach rather than incorporating ongoing fees is because it’s a once-off fee. i.e. it impacts the first year return but then has little impact on investor return for each additional year of ownership.