** The information provided on this webpage is only a summary of the offer and may not contain all the information needed to determine if this offer is right for you. You should read the Prospectus in its entirety which can be downloaded in the Downloads section below as well as on the Project application page once you press the INVEST HERE button.
The Company is seeking to raise up to $1,000,000 by offering investors the opportunity to purchase Redeemable Preference Shares in the Company under the offer. The investment objective is to provide you with investment exposure to a property development project with small investment amounts and a relatively short (6 to 9 months) investment time frame. The purpose of the issue is to enable the Company to lend the funds raised to Smart Capital Property & Development PTY LTD (ACN 616 212 527) (“Main SPV”) which will assist them to complete construction and bring to market a luxury renovated home at 10 Bernhard Street, Paddington, Brisbane, Qld, 4064 (“land”).
Note that even though the interest rate is set to 20% for the loan agreement between the Company and Main SPV, investors will only receive their return based on the amount they invest as explained in section 19.2.2 in the Prospectus. If there is any surplus left after distributing the proceeds as required to the investors, then it will be distributed to Ordinary shareholders.
All investments carry a risk. There are a number of risks associated with an investment in the Company. Some of the key risks that may impact on the value of your investment in the Company include:
Property Market Downturn risk - In recent years Property prices have grown significantly, particularly in Sydney and Melbourne. This has led to a concern that a bubble is forming in the Property market. While the principals of this project believe that this undertaking will be profitable a rapid downturn in investor sentiment can see reduction in the prices that may be achievable on sale of the house. This would impact investor returns adversely as the profits available for distribution could be lower.
LIQUIDITY - The Redeemable Preference Shares will not be listed on any stock exchange. As such, there is no secondary market to buy or sell Redeemable Preference Shares. Therefore, an investment in Redeemable Preference Shares should be considered non liquid. The investors are however free to find their own buyers and the management of the Company will assist in recording such private sales in the Company’s share register.
CONSTRUCTION DELAYS - Weather delays, Industrial action, delay from contractors, soil issues and a number of unforeseen factors can all cause to stoppages of work as well as increase the costs required to complete the construction. This can delay the project, increase the costs or reduce the return available to investors. While potential delays due to above mentioned factors are beyond the control of the Main SPV, a 3rd party Quantity Surveyor will be appointed to assist management against construction costs blowouts. The builder will be in a fixed price contract with penalties for time delays, as part of the building approval process the builder will be required to take out QBCC home warranty insurance which should cover the project for any incomplete or defective work.
INTEREST RATE RISK - Property prices are often susceptible to interest rate changes. Lower interest rates can lead to more purchasers entering the market driving the prices up and vice versa. Any hikes in the interest rate by the RBA can adversely impact the project by making it harder for potential buyers to access funding to purchase the property.
SETTLEMENT RISK - The Land Buyer has a contract of purchase on the Land which settles on 26th June 2017. If the Land Buyer and the Development Company (Main SPV) are unable to source the required funds to complete the settlement of the project then all investor monies will be refunded in their entirety. Investor funds will not be used for land acquisition.
OWNER DEFAULT RISK - The Development Company (Main SPV) has a Development Mandate on the land at 10 Bernhard St. In order to settle the land purchase the Land Buyer intends to take on borrowings from a major Australian Bank for around $800,000. The Land Buyer will have to service the interest on this mortgage during the progress of this Project. If the Land Buyer defaults on his obligations to the first mortgagee then that could lead to the first mortgagee stepping in and selling the property at auction which could lead to an adverse investment outcome for investors including a capital loss.
BANK LENDING POLICIES - In recent months Australian Banks have tightened the lending criteria significantly, especially for foreign home buyers. This has made it harder for both Domestic and International purchasers from acquiring the funding to buy and settle on a property purchase.
DEPENDENCE UPON KEY PERSONNEL - The Company depends on the talent and experience of the Company's personnel as its primary asset. Should any of its key personnel leave, this may have a negative impact on the Company.
CONTRACTUAL RISK - There is a risk that contractual counterparties, such as any technology developers and other project contractors, may default on their obligations to the Company thereby leading to delays.
GEARING RISK - In the event that sufficient funds are not raised via this offer, the Land Buyer and the Development Company (Main SPV) will seek additional funds by borrowing from a lender specializing in construction lending. This lender will likely take a senior position ahead of the investors participating in this offer placing investor returns at risk due to a higher loan amount to be paid before to the lender before investor returns can be paid.
VALUATION RISK - There is a risk that the valuation analysis undertaken by the SPV on which the decision to proceed with the loan to the Main SPV is defective and does not accurately reflect the value of the property at that time or on completion of the development.
MARKET RISK - The expected end values may not be achieved for sales due to changing market conditions leading to lower or no profits from the execution of the project. This will lead to a reduced or no return to investors.
GENERAL ECONOMIC CONDITIONS - The Company’s operating and financial performance is influenced by a variety of general economic and business conditions including the level of inflation, interest rates and government fiscal, monetary and regulatory policies.
On completion of construction of 10 Bernhard Street, it will be sold on the market at the best available price. The Main SPV intends to use the receipts from the sale of the luxury home to repay the loan and associated interest to the Company. Investors in this offer will receive a Preference dividend as defined in the below table on their investment amount at this time. The expected time for the completion for this project is 6-9 months. It is however possible that the project may finish sooner. It is also possible that weather and other delays (see risks) may delay the completion of this project. In both scenarios investors Preference dividend return is fixed based on the amount they invest in the following table and will not change regardless of the time taken for the project. The Company will pay any Dividends only out of proceeds received as interest from the loan made to the Main SPV (Development Company explained further down) This loan payment can only be done using the proceeds from the sale of the completed house at 10 Bernhard Street and the Main SPV may extend the project time frame until such a sale is achieved.
10 Bernard St, Paddington, 4064, Australia
Paddington is an inner city suburb of Brisbane, Australia located 2 kilometres (1.2 mi) west of the Brisbane CBD. Many original and distinctive Queenslander homes can be found in the suburb. In recent years, Paddington has become a very desirable residential location. Between 2005 and 2010, the median house price has risen over 50% to $1,000,000. Paddington was one of the first, if not the first, suburbs to be gentrified, and developed a coffee culture in the 1980s which is still significant and vibrant today.
Analysis of residential sales between 2013 and 2017 indicates that the median price of a detached house in the Paddington area increased from $750,000 to $1,020,250 at an average rate of 7.39% per annum. The area only fell 4.66% during the GFC (Dec 2009).
Return Paid As
Smart Capital Paddington 10 Ltd
How To Invest
|Account Name||Smart Capital Paddington 10 Limited|
|Reference||Padd (Investor Name)|
* Note that this is a No Obligation Expression of interest, you get to review the Prospectus before making any decisions
What type of company is this?
Australian Public Unlisted Company
What type of investment in this company is being offered?
On offer is the opportunity to subscribe to Preference Shares of SMART CAPITAL PADDINGTON 10 LIMITED . Investments start from $5,000 and can be up to a maximum of $1,000,000
What type of return is expected?
10-20% depending on your amount of investment. Please scroll up and refer to Investor Distribution section under PROJECT SUMMARY for the investment and return table. Details are also available in the Prospectus that you can download from this page.
What is the rank of this company's investment in the development entity?
SMART CAPITAL PADDINGTON 10 LIMITED is providing a mezzanine debt to the development entity. Therefore it ranks below any 1st Mortgagee (typically a bank) who is funding the project but above any shareholders of the development entity (the developers). This means you get your money before the developer get theirs.
What is the rank of my investment in this company?
Since you are subscribing to Redeemable Preference Shares, your investment ranks above those of the ordinary shareholders at SMART CAPITAL PADDINGTON 10 LIMITED.
Once I have invested, how can I receive updates?
The PROJECT PROGRESS section on the top of this page is periodically updated and will provide relevant information and updates time to time (typically on a quarterly basis).
When does subcription close for this round of funding?
Subscription closes on 8th July 2017 (unless the offer is fully subscribed earlier)