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Investment Strategy

The three main objectives of the fund are to combine these critical factors in the investment strategy:-

  • Maximise the actual returns of the fund.
  • Manage the risk of the fund.
  • Deliver the returns of the fund.

by using the expertise of Otan.

The two main types of property assets that Otan Property Funds Management Ltd (as responsible entity of the Otan Property Fund) (Otan) will be purchasing and investing in:-

  1.  Development properties
  2.  Passive leased properties

Development Properties

The four main types of property development will be infill residential property, residential projects including apartments, broad acre residential land subdivision and commercial projects. The commercial projects may be stand alone or located with residential development. Otan is not limited to these types of developments as property development is a “deal based” enterprise.

Otan's property development business will be mainly, but not exclusively, located in Western Australia. Otan may look to invest in other parts of Australia or overseas.

The town planning risk should be minimal although development approvals or town planning permits may not be in place prior to any purchase. Where development approvals and/or town planning permits are not granted or are granted but differ to Otan's original application, Otan expects the development to proceed with the similar returns.

Pre sales or pre leasing should be achieved where ever possible to minimize risk.
It is Otan's intension that land will be purchased with investor funds and the development will be funded by debt. Any debt will be secured against the land and it will have no recourse to the investors.
The return to the investor will vary depending on the current economic climate and the risk of any particular transaction.

Investment returns will be paid once all the debt in respect of the project is paid. Otan will consider making returns to investors before the debt is repaid if a favourable staging of the development or risk minimization strategy is achieved.

Pindan will be appointed as project manager of the developments. Pindan's obligations include providing the following services:

  1. Sourcing suitable property sites;
  2. Conducting due diligence;
  3. Arranging acquisition finance;
  4. Managing building works; and
  5. Marketing the development.

Pindan and Otan share common shareholders and directors. In this regard, it is important for Otan to manage any actual or potential conflicts of interest with respect to Pindan's appointment as project manager and builder of the properties.

Otan seeks to ensure that if a conflict of interest arises it will be adequately managed through the execution of a Services Agreement outlining the services Pindan will provide and the fees it will charge. Further, Otan will conduct the following process in respect to each development project:

  1. All building tender prices are supplied from at least 3 subcontractors to ensure it is a competitive tender;
  2. Pindan’s tender price, including prelims, subcontractor prices and supply prices are reviewed by an independent quantity surveyor. Normally the bank carrying out the project financing requires this to be carried out as well;
  3. Pindan provides a fixed price, fixed time contract and liquidated damages are provided for within the contract; and
  4. Any variations to the contract must be approved by the independent quantity surveyor.

Bank debt will be organized prior to construction commencing. Pindan, as part of its mandate, will arrange such debt for the project. Otan is aware that Pindan will share the commission awarded to the finance broker by the bank providing the debt. 

Passive Investments

Otan will purchase all types of commercial properties and will look for good quality assets that can be held for seven years or more.

The level of debt will be conservative and it is preferred to have a positive cash flow after all costs and debt is paid. The loan to value ration of the debt will vary depending on the type, style, category and the rental yield of the acquisition.

Properties that maybe modified to increase the returns will also be considered. The properties passing yields will vary according to the property type.

The return to the investor will vary depending on the current economic climate and the risk of any particular transaction.

General

The development sites and passive investments maybe sold prior to their completion or investment time frame if a favourable offer is received.

Cash

When investors hold Cash Units in the Otan Property Fund, the funds representing the Cash Units will be invested in liquid assets such as at call bank accounts, other bank deposits or cash management trusts that invest in government securities and bank deposits, bank accepted bills of exchange and fixed interest securities.

 



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