Limited opportunity to invest in a sector with significant Government support
Limited equity on offer - only 2,700,000 Units
+ 6.25%* projected cash return paid monthly
+ Fund seeded with newly built centre in a growing city location
+ 15-year lease commencing 28 June 2021
+ Proven daycare operator running multiple sites in New Zealand
+ Government-backed sector – initial centre licensed by MoE for 87 children
+ Limited equity – only $2,700,000 available in this offer
+ $100,000 minimum investment for wholesale/eligible investors only
+ Offer closes 17 September 2021, or earlier if fully subscribed
*Projected pre-tax return for full one-year period. Details on how the return will be calculated, and the risk associated with the investment and return, will be set out in the Information Memorandum.
The Offer will be restricted to “Wholesale Investors” under clauses 3(2) and 3(3) of Schedule 1 to the Financial Markets Conduct Act 2013 (or to any other person to whom an exclusion applies under Schedule 1 of that Act). Preliminary indications of interest are being sought at this stage and no indication of interest will involve an obligation or a commitment to participate in the Offer.
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24 Brent Greig Lane, Burbush, Hamilton
Description: Newly built daycare centre with separate office space and 27 car parks
Land Area: 1,717 sqm
Floor Area: 639 sqm
Purchase Price: $4,193,000
Market Valuation: $4,250,000
Annual Rent: $230,610
Lease Term: Fifteen (15) Years Lease Term from 28 June 2021. Four (4) Rights of Renewal of Five (5) Years each
Tenant: The Rainbow Corner Early Learning Centre Private Limited
Acquiring a Portfolio of Daycare Properties
The General Partner’s objective is to create, over a period of time, a portfolio of daycare properties that provide exposure to this unique commercial property category. We are attracted to this sector by the long leases that are typically in place and the value associated with the Ministry of Education (MoE) license for the premises.
Target Annual Cash Return
The SIPO for the Limited Partnership will include a target distribution to investors of at least 6.25% per annum (Cash Net Pre-Tax Annual Yield on Equity).
There are a number of risks that could impact the performance and financial returns of the LP. Potential general and specific risks include, but are not limited to, the following:
Tenant Default or Non-Renewal: the Tenant of the Initial Property, or the tenants of Properties acquired in the future may fail to pay the rental and outgoings (defaulting) which may affect projected returns. Also, the current tenant may not renew lease arrangements and a new tenant may be required. Costs, including lease incentives, may be required on re-leasing and there may be extended periods where a tenancy does not earn income.
Interest: Interest rates may increase and increase the mortgage repayments due from the Limited Partnership to the bank. 42.57% of the purchase price of the Initial Property will be funded by interest-bearing borrowings and the interest expense is a material expense for the Limited Partnership. Changes to bank loan terms and conditions, for example in respect to interest rates, bank margins, loan to value ratios, principal repayment requirements, etc, either as a result of bank policy changes or the requirement that the bank comply with changes to external regulatory requirements, may affect the Limited Partnership. The General Partner will actively monitor interest rates during the life of the Limited Partnership.
Forecasts: Actual results are likely to be different to the forecasts since anticipated events frequently do not occur as expected and the variation may be significant and material. No warranty or representation is made in respect of whether the revenue, expenses, or any capital appreciation in the future will be achieved. Prospective investors should obtain their own independent valuation, legal, accounting and income tax advice in respect to their own individual circumstances. On settlement
of the Initial Property, working capital of $8,000, and the vendor rent contribution of $35,000, will be available for unexpected maintenance or other costs, which may impact the annual projected cash return. These amounts could be used to pay in part, or in full, any amounts relating to the risks identified above.
Damage or Destruction: A property may be destroyed and the event may not be adequately covered by the insurer of the Initial Property (or any other Properties acquired in the future). The General Partner will arrange insurance on the Initial Property and recharge this cost to the Tenant in accordance with the Lease, and will follow the same practice with any
other Properties acquired by the Limited Partnership in the future.
Liquidity: Property is an inherently long-term investment and cannot be easily sold. A property may be sold at a loss in which case Limited Partners may not be able to recover the full amount of their original investment. There is no guarantee of capital gain on the Initial Property or any other Properties acquired by the Limited Partnership in the future.
Capital Expenditure Risk: The capital expenditure for the Initial Property (and any other Properties acquired in the future) may be more than budgeted. Significant additional capital expenditure in excess of forecast amounts may be required for a number of reasons, including undertaking
structural repairs or related work to bring a property up to a designated standard or to meet new requirements resulting from changes to current regulations or standards.