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INTRODUCTION TO MANUFACTURED EQUITY INVESTING WITH FUTURE ESTATE
Intelligent Property Investment
Future Estate eBooks Series: INTRODUCTION TO FUTURE ESTATE
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WHO IS FUTURE ESTATE? Future Estate is a leading property advisory and investment firm based in Sydney, Australia. Our mission is to source, develop and manage carefully selected residential investment projects on behalf of, and in conjunction with, our valued clients. We are currently developing, managing, investing in and advising on residential development projects with an end value in excess of $200 million. In addition to managed projects, we offer over $ 1 billion panel of investment graded selected projects and properties to our clients.
Our key products include: QQ QQ QQ QQ
Property investment advisory Manufactured Equity Product (MEP) Pre-sale investment opportunities Property-based wealth creation strategy
WHAT IS MEP? The Manufactured Equity Product, or MEP, is so called because it offers investors the opportunity to pre-purchase residential properties at developer cost price by participating in the initial equity funding of the projects. The typical investment return equates to a 10% – 20% effective discount to the property price, or generally 20% + annual return on equity invested. The MEP is the ideal investment for property investors as it offers both the benefits of higher potential investment returns from development and the security of property ownership at project completion.
MEP at a glance Key Term
Details
What Is It?
QQ QQ
Target Returns
Investment Terms
QQ QQ
Typically return circa 15% of the property acquired e.g. $75,000 on a $500,000 property During development of the project Generally around 2 years
Investment Amount
Typically $100,000 – $150,000 equity
Property Price
Generally $400,000 – $600,000
Geographical Focus
QQ QQ
Market Focus
QQ QQ
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Property managed fund (equity) Private property ownership on building completion
Australian capital cities Key infrastructure and employment hubs of mining regions Affordable high quality investment property High yields, low rental vacancy and broadly accessible price point
Future Estate eBooks Series: INTRODUCTION TO FUTURE ESTATE
INVESTMENT BENEFITS Access Direct Properties at Near Cost Price QQ
Access direct properties at near cost prices with a single investment amount of $100,000 – $150,000
Enjoy Effective Discounts (10%-20%) QQ
Enjoy effective discounts of 10% – 20% versus list price via investment in MEP by participating in the equity funding of the development (Become a passive developer)
Generate Target Return of over 20% P.A. QQ
Forecast annual returns of over 20% with return on equity generally in excess of 50% over project as little as 24 months Create a long term portfolio with Future Estate and grow your wealth using the Portfolio Accelerator Program
Risk Mitigate Your Investment QQ
Secure risk-mitigated investment under our rigorous due diligence and risk management processes Find properties that are classified as “Investment Grade” by our dedicated Market Research Team
Stay Compliant with Regulations QQ
Invest in a SMSF regulation compliant product through ASIC registered scheme under Product Disclosure Statement
Benefit from Our Expertise and Experience QQ
Benefit from our experienced Development and Investment Team
Future Estate eBooks Series: INTRODUCTION TO FUTURE ESTATE
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mep process How your investment is managed
1 DA/DUE DILGENCE 0–3 months
2
3
OFFER
3–6 months
CONSTRUCTION 6–21 months
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COMPLETION 21–24 months
2 YEARS
1. Development Approvals and Due Diligence Period QQ QQ
Suitable projects sourced under stringent selection criteria Necessary development consents are secured
2. Offer Period QQ
Equity and debt funding for the project is secured
3. Construction Period QQ QQ
Development management of the project Construction and project marketing
4. Project Completion QQ QQ QQ QQ
Settlement period – MEP investors settle on the acquired property Bank / financier is repaid capital and interest MEP Investors receive return of capital MEP Investors receive project return subject to terms of Investment Offer
Future Estate manages the entire process for you until project completion.
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Future Estate eBooks Series: INTRODUCTION TO FUTURE ESTATE
investment steps what you need to do
step 1
MEP Investors pay $125,000 for a Unit in the Trust (the MEP Unit Trust)
step 2
Each MEP Investor enters into a pre-sale purchase contract to acquire an apartment for list price – say $500,000
step 3
Investors may be required to provide a 10% deposit for the purchase contract by way of a bank guarantee or cash
step 4
Construction period (of approximately 2 years)
step 5
Investors settle on the acquired property
step 6
Post settlement, investors have the right to receive return of capital and investment returns – equating to an average payment of up to $200,000 comprising: 1. A return of capital paid for their Unit in the Trust, being $125,000; and 2. A Trust distribution payment equal to approximately 15% of the market value of the apartment purchased, up to a maximum cash amount of $75,000. Please note that the forecast investment returns are not guaranteed and may vary if costs changed or the remaining apartments are not sold at expected rates.
plus
Although the investment return on Units is capped at a maximum cash amount of $75,000, investors will be entitled to the full benefit of any capital growth achieved for their apartment between entering into the purchase contract and completion of the purchase.
Future Estate eBooks Series: INTRODUCTION TO FUTURE ESTATE
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mep example Assumptions
Effective Acquisition Cost
Project Term
24 Months
Property Value
$ 500,000
MEP Investment Amount
$ 125,000 $ 75,000
Forecast MEP Return MEP Return (% of Property Value)
15 %
MEP Forecast Return on Equity
60 %
Net Cost VS Retail Price
“Manufactured” equty of $75,000
10 %
Pre-sale Deposit Amount (if required) (%)
$ 50,000
Pre-sale Deposit Amount (if required) ($)
5%
Stamp Duty (%) Stamp Duty ($)
$ 25,000
Weekly Rental
$ 600
LVR (Investment Return applied to mortgage)
Future Estate Net Acquisition Cost
List Price
Rental Yield Comparision
Initial LVR reduced from 80% to 65% when compared to an ordinary “retail” purchase of the property
Yield on Cost of 6.2% VS 7.3% for an ordinary “retail” purchase
Ordinary “Retail” purchase
Future Estate Offer
Yield on “Retail” Purchase Price
Yield on Cost (Future Estate Offer)
MEP at a Glance
MEP enables investors to cut out the typical developer profit and access property at near cost price.
$75,000 of Manufactured Equity
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Future Estate eBooks Series: INTRODUCTION TO FUTURE ESTATE
FREQUENTLY ASKED QUESTIONS Below are commonly asked questions about Future Estate. If you have a question that isn’t covered here, we’d be more than happy to answer you directly. Just contact us.
Why should I invest with Future Estate? Future Estate sources, selects and develops some of Australia’s best off-market residential investment opportunities. Our revolutionary Manufactured Equity Product (or MEP) enables our clients to acquire properties at near developer cost price. Our investors have access to high target returns and risk mitigated residential development investment opportunities via investing in a MEP. Future Estates has an experienced team with the expertise necessary to successfully and reliably manage projects to completion. Future Estate manages your investments under an ASIC registered scheme which means rigorous compliance and corporate governance standards apply. Independent custodian, compliance committee and audits ensure your investment is in safe hands. Future Estate’s team is multidisciplinary across all facets of property investment, development funds management and investment banking. The team has a demonstrated track record across all areas of property development and investment.
How much do I need to start? The initial deposit usually equates to 20% – 30% of the independent valuation of the property. For example, if you are to purchase a two-bedroom apartment that is worth $500,000, the initial contribution could be from $100,000 to $150,000. In addition, you may also be required to provide cash or a bank guarantee for a 10% deposit on the property purchased, which on a $500,000 apartment would be $50,000.
Can overseas investors participate? Yes. Australian expatriates and overseas investors enjoy the same right as Australian domestic investors. This means that overseas investors have access to Future Estate’s full service property investment offering.
I know nothing about development, is this for me? By investing in Future Estate projects, you have access to the expertise of a highly qualified team of property professionals with a broad spectrum of experience in property investment, development, construction, sales and marketing. Therefore you don’t need to know anything about development to participate. We manage the process from start to finish on your behalf. In addition our interactive investor online information sections and tools will assist in developing your property development knowledge.
Who develops the property? Future Estate has an experienced team of property professionals and leading expert consultants. Under certain circumstances we partner with project managers or builders who are charged with the primary responsibility of project delivery. In both cases, we undertake a rigorous due diligence process and only undertake sound projects with credible and experienced service providers with sufficient financial position and capability.
What is the property selection process? Future Estate engages in a rigorous selection process to ensure that only the highest quality developments projects located in strategic growth areas are offered to our clients. Extensive market research and rigorous due diligence process are undertaken to ensure the higher quality for each and every project that is offered to our clients.
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X If you would like more information about us and our advisory services, investment properties and products, simply call, email or visit.
1300 future (388 873) info@futureestate.com.au www.futureestate.com.au @futureestate future.estate future estate
Copyright Š Future Estate Group Pty Ltd 2012
This document contains general information and does not contain personal advice or financial product advice. This information has been prepared without taking account of your objectives, financial situation or needs. Accordingly, before acting on this information and making financial decisions, you should consider whether this information is appropriate for you and are recommended to seek independent financial, investment, tax and/or legal advice having regard to your own objectives, financial situation and needs. This information may contain material provided to Future Estate Group Pty Ltd by third parties. While such material is published with necessary permission, Future Estate Group Pty Ltd and its related entities accept no responsibility for the accuracy or completeness of this information, nor endorses it. To the maximum extent permitted by law, Future Estate Group Pty and its related entities disclaim all liability for any loss, costs or damage which arises in connection with the use or reliance on the information and material contained in this document. Any forward looking statements and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Furthermore, past performance is not a true indicator of future performance. Any past performance information in this document has been given for illustrative purposes only and should not be relied upon as an indication of future performance.
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Future Estate eBooks Series: INTRODUCTION TO FUTURE ESTATE