109
Centro Property Syndicate PROSPECTUS Roselands Property Trust & Roselands Holdings Trust Manager - CPT Manager Limited ACN 054 494 307 Adviser & Underwriter
Centro Property Syndicate
PROSPECTUS
Roselands Property Trust & Roselands Holdings Trust
Manager - CPT Manager Limited ACN 054 494 307 Adviser & Underwriter
Directory
Manager Trustee of RPT and RHTCPT Manager Limited Trust Company of Australia LimitedACN 054 494 307 ACN 004 027 749Level 1 151 Rathdowne Street372 Wellington Road Carlton VIC 3053Mulgrave VIC 3170
Centro Investigating Accountant & Tax AdviserCentro Properties Limited PricewaterhouseCoopers Securities LtdACN 006 378 369 ACN 003 311 617Level 1 333 Collins Street372 Wellington Road Melbourne VIC 3000Mulgrave VIC 3170
Directors of Centro and Registrythe Manager Coopers & Lybrand SecuritiesBrian Healey Registration ServicesAndrew Scott Locked Bag A14Graham Goldie Sydney South NSW 1232David Graham Tel: (02) 8266 2111Laurie Wilson Fax: (02) 9261 8489
Adviser & UnderwriterWarburg Dillon Read Australia LimitedACN 008 582 705Level 25 Governor Phillip Tower1 Farrer PlaceSydney NSW 2000
This prospectus is dated 3 July 1998 and was lodged with the Australian SecuritiesCommission (“ASC”) on 6 July 1998. The ASC takes no responsibility for the contents ofthis prospectus or the merits of the investment to which this prospectus relates. Other thanthe issuing of Centro Stapled Securities on conversion of units pursuant to the terms andconditions on which the units are issued, no securities will be allotted or issued on thebasis of this prospectus later than 12 months after the date of the issue of this prospectus.
None of the Trustee, the Manager, Centro Properties Group or Commonwealth Bank northeir associates or directors guarantees the success of the Trusts, the repayment of capitalor any particular rate of capital or income return.
This prospectus contains important information and you should read it carefully. If youhave any questions, please contact the Manager, your stockbroker or professional adviser.
This prospectus is issued by CPT Manager Limited (as Manager of the RoselandsProperty Trust and the Roselands Holdings Trust) and (in relation to Section 13 only)Centro Properties Limited.
Neither Trust Company of Australia Limited nor Commonwealth Bank has authorised orcaused the issue of this prospectus. Accordingly, neither Trust Company of AustraliaLimited nor Commonwealth Bank makes any representation regarding, and takes noresponsibility for, any statements in, or omissions from, this prospectus.
1
Contents
Letter from the Manager 3
Directors of the Manager 4
1. The Investment Opportunity 5
2. Roselands Shopping Centre 13
3. Financial Information 31
4. Roselands Property Trust: Details of the Offer 39
5. Roselands Property Trust: How to Invest 43
6. Roselands Holdings Trust: Details of the Offer 44
7. Roselands Holdings Trust: How to Invest 45
8. Information for Investors 46
9. Investment Risks 49
10. Summary of Valuer’s Report 52
11. Investigating Accountant’s Report 56
12. Taxation Information 59
13. The Manager and Centro 65
14. Additional Information 71
15. Signatures and Directors’ Statement 95
16. Glossary of Terms 96
Timetable
Offer opens 15 July 1998Offer closes 15 September 1998
Prior to the Closing Date, the Manager may advise applicants that applications are nolonger being received, accordingly investors are encouraged to submit their applications assoon as possible.
2
Letter from the Manager
Dear Investor,
We are pleased to offer investors the opportunity to participate in the ownership of a 50 percent interest in Roselands Shopping Centre (“Roselands” or the “Property”), by investing inthe Roselands Property Trust (“RPT”). RPT owns a 50 per cent interest in RoselandsInvestment Trust (“RIT”), the owner of Roselands. The other 50 per cent interest in RIT isheld by Centro Property Trust, a member of the Centro Properties Group, a substantialAustralian listed property group with a market capitalisation in excess of $400 million.
Roselands is a regional shopping centre located in the south-western Sydney suburb ofRoselands in the Canterbury municipality. The Property has several major tenants includingGrace Bros, Target, Coles, Franklins and a range of national specialty retailers. The majortenancies are on long term leases, with an average expiry of 19.1 years representing 22per cent of the Property’s current base income.
RPT’s forecast distributions are estimated to provide an initial annualised return on equityof 10.0 per cent for the period to 30 June 1999, rising to 12.4 per cent by 30 June 2004.These forecasts must be read in conjunction with the investment assumptions and riskfactors set out in Sections 3 and 9 of this prospectus. The income yield of this investment,and the stable income stream of regional shopping centres, are seen as attractive in thecurrent environment of low inflation and interest rates. Further, the Property offersredevelopment opportunities which will be explored by the Manager.
RPT is not listed and there is unlikely to be a secondary market for RPT units. Accordingly,you should view this as a long term investment. RPT will terminate after six years, atwhich time investors will be able to sell (or “put”) their units to Centro at the unit value atthat time. If any units are put, Centro may buy (or “call”) all investors’ units at the sameprice. The consideration will be paid, at Centro’s election, in cash, in Centro StapledSecurities or any combination thereof. Otherwise, RPT’s interest in Roselands will be soldand the net proceeds distributed to investors. Full details of these arrangements arecontained in this prospectus.
The investment opportunity offers investors the key benefits of:
• exposure to a regional shopping centre located in a major Australian retail catchment;
• stability of income stream derived from a mix of multiple major tenants on long termleases and national specialty retailers;
• participation in any long term capital growth of Roselands;
• half yearly income distributions which are forecast to be partially tax advantaged;
• access to Centro’s property and asset management expertise; and
• a clear exit mechanism from the investment after six years.
We encourage you to participate in this opportunity, full details of which are contained inthis prospectus.
Yours sincerely,CPT Manager Limited
Brian HealeyChairman
3
Directors of the Manager
From left: L. Wilson, B. Healey, A. Scott, D. Graham and G. Goldie.
4
1. The Investment Opportunity
Overview
This prospectus offers investors the opportunity to participate in the acquisition of a 50per cent interest in Roselands by investing in RPT, an unlisted property trust which owns50 per cent of RIT, the owner of Roselands.
Roselands is a regional shopping centre located in Canterbury, a south-westernmetropolitan district of Sydney. The key attributes of this investment and Roselandsinclude:
• its long term history as a prominent Australian regional shopping centre;
• anchored by long term leases to major tenants such as Grace Bros, Target, Coles andFranklins;
• a strong tenancy mix including many of Australia’s national specialty retailers;
• situated in a densely populated region providing an estimated total catchment of276,000 persons with forecast population growth;
• limited opportunities for further significant competition;
• strong investment yield; and
• investment exit mechanism after 6 years (ie 30 June 2004).
Roselands is 100 per cent owned by RIT. RPT has purchased 50 per cent of the units inRIT at an effective passing property yield of approximately 8.5 per cent (ie before normalacquisition costs). The acquisition funding was initially provided by means of a fully drawnloan facility of $39.8 million provided by the Underwriter and a limited recourse securedloan facility, which was drawn down to $56.3 million, provided by the Commonwealth Bank.The terms of the loan facility and the limited recourse secured loan facility are summarisedin Section 14.
RPT is now raising approximately $95.1 million, of which approximately $39.8 million isto be provided by investors on application to repay the loan facility provided by theUnderwriter, and approximately $55.3 million (after loan arrangement fees and otherassociated costs) is to be sourced by the transfer to investors of the limited recoursesecured loan facility. Investors can invest in RPT or Roselands Holdings Trust (“RHT”)for those investors who do not wish to borrow in their own right (see Sections 4 and 6).Full details of the application of funds are set out on page 38.
An investment made under this prospectus should be viewed as long term. There is nobuy-back or redemption facility in relation to units in either RPT or RHT. Units in the Trustsare likely to be illiquid as there is unlikely to be a secondary market.
5
Roselands Shopping Centre
Roselands is a regional shopping centre located in the south-western suburbs of Sydney.It is situated in a large retail catchment of approximately 276,000 persons and is anchoredby many of Australia’s largest retailers. In particular, tenants include Grace Brosdepartment store, Coles supermarket, Target discount department store and Franklinssupermarket, and a broad mix of national specialty retailers. Majors and national specialtytenants underpin 64 per cent of the Property’s current gross income.
6
The Property’s annual sales turnover to April, 1998 was $228.4 million comprised asfollows:
Property’s Annual Sales Turnover
Roselands was one of Australia’s first regional shopping centres when constructed in the1960’s and has been refurbished and extended a number of times since, the last being in1993. The centre has shown growth in sales since 1992, as illustrated below:
Moving Annual Turnover (“MAT”) to year ending April
The Manager believes that Roselands may increase in value if:
• sales turnover of the major and specialty tenants continues to increase;
• operating expenses of the Property are reduced in real terms;
• the general retail property market and in particular the Canterbury retail property marketimproves;
• demand for retail properties exhibiting stable income streams increases; and
• the potential for future expansion of the Property is realised.
Specialty Tenants$100.9m
44%
Major Tenants$127.5m
56%
7
1992195,000,000
200,000,000
205,000,000
210,000,000
215,000,000
220,000,000
225,000,000
230,000,000
1993 1994 1995 199819971996
Mov
ing
Ann
ual T
urno
ver
("M
AT")
Financial Forecasts
The following table summarises the distribution forecasts of RPT for the 9.5 monthinvestment period ending 30 June 1999 and for each successive year up to 30 June 2004.
9.5 months 12 months 12 months 12 months 12 months 12 monthsto 30 June to 30 June to 30 June to 30 June to 30 June to 30 June
1999 2000 2001 2002 2003 2004
Net distribution(cents per unit) 7.91 10.45 10.70 11.20 11.70 12.41
Return on equitysubscribed (1) 10.00% 10.45% 10.70% 11.20% 11.70% 12.41%
Tax advantaged % 32% 27% 32% 29% 26% 20%
Estimated ManagementExpense Ratio (2) (%) 0.18% (3) 0.28% 0.67% 0.67% 0.67% 0.67%
(1) Annualised return on equity subscribed from the Closing Date. Units allotted prior to the Closing Date will not beentitled to a higher distribution. Investors whose unit;s are allotted prior to the Closing Date will be entitled tointerest at a rate of 10.0 per cent per annum between the date of allotment and the Closing Date, paid by theUnderwriter.
(2) Management expense ratio includes Manager’s and Trustee’s fees and all other expenses (excluding interest)incurred by investors in RPT and RHT.
(3) Annualised and including capitalised management expenses.
Subscriptions Received Prior to Closing Date
The offer will close on 15 September 1998. Subject to the Manager’s right to allot lessthan the number of units applied for, or to decline any application, units will be allottedshortly after the receipt of subscriptions. Investors waive the right to receive notice ofallotment. If undersubscribed, the Underwriter will subscribe for any shortfall, on 15September 1998.
All units allotted will receive the same net distribution entitlement.
As investors subscribe for units in RPT, units will be allotted and the Underwriters loanfacility will be repaid. The total contribution of $2.41 per RPT unit comprises $1.00 incash paid by investors and approximately $1.41 being the transfer to the investor ofprincipal borrowed by RPT from the Commonwealth Bank of which approximately $0.03represents associated loan arrangement costs. The loan has been arranged on investors’behalf by Centro Syndication Finance Pty Ltd (“CSF”). The transfer to the investors ofdebt borrowed from the Commonwealth Bank will occur on or around 15 September 1998.The associated loan arrangement costs can be claimed as a tax deduction by investorsin equal instalments over the term of the loan.
The Underwriter will pay investors interest at a rate of 10.0 per cent per annum, on equityfunds received where units have been allotted. This interest will be payable during theperiod between the date of allotment of the units and 15 September 1998.
8
Exit Mechanism
An investment made under this prospectus should be viewed as long term. Units in RPTand RHT are likely to be illiquid as it is unlikely there will be a secondary market for units.RPT and RHT will terminate after six years (unless all Unitholders otherwise agree).After six years, the following exit mechanism will apply:
Investors’ Put Option
In August 2004, investors will have the ability to sell their units in RPT or RHT to Centro atthe then current unit value. This value could be higher or lower than the initial price of theunits. Centro, or its nominee(s), may choose, at Centro’s election, to pay for those unitswith either cash, Centro Stapled Securities (at a 0.5 per cent discount to market value)or any combination thereof. If Centro chooses to pay by the issue of Centro StapledSecurities to investors, the market price of those Centro Stapled Securities will be basedon the average ASX market price of Centro Stapled Securities (adjusted for distributiondifferences) over a 10 day period prior to payment and application will be made for theirquotation on the Australian Stock Exchange Limited (“ASX”) within 3 business days afterthe date of allotment or issue.
Investors should note this put option may not be exercised by investors if the Bank isentitled to call for immediate repayment of the Loan. The circumstances in which the Bankcould be so entitled are set out in the summary of the Loan in Section 14.
Centro Call Option
If any RPT or RHT units are put by investors to Centro, at the same date (ie August 2004)Centro may require that all investors sell all of their RPT or RHT units on the same basis.
A detailed description of the Exit Mechanism is set out in Section 14. Further informationabout Centro Stapled Securities and Centro Properties Group is set out in Section 13.
Investors should be aware that Centro may exercise its “call” option based upon the currentunit value at the time of exercise. This value could be higher or lower than the initial priceof the units.
9
Termination
If Centro does not acquire all of the RPT and RHT units held by investors as describedabove, RPT’s 50 per cent holding in RIT will be offered for sale on the market for threemonths. Investors should note that under the Joint Venture Agreement between RPT andCentro Properties Group (summarised in Section 14), the Centro Properties Group (asholder of the other 50 per cent holding in RIT) has a pre-emptive right to match any offerreceived from a third party.
If no offer is received within the three month selling period, Centro has the right topurchase RPT’s 50 per cent holding in RIT based on the June 2004 valuation of theProperty. If Centro does not do so, the 50 per cent holding will continue to be marketeduntil sold. The net proceeds (after allowing for expenses and repayment of the Loan)will be distributed to investors in proportion to their unitholdings.
10
Participation by Investors
Investors can participate in two ways as shown in the diagram below:
The RPT Offer (see Section 4)
Investors may invest directly in RPT and leverage their investment by assumption of thelimited recourse secured Loan provided by the Commonwealth Bank to RPT to financethe acquisition of RPT’s 50 per cent holding in RIT, associated acquisition andestablishment costs and expenses and, to the extent of any principal repayment, thepayment of distributions to investors. The cost of acquiring each RPT unit is $2.41.Of this amount, investors need only contribute $1.00 per unit on application. The balanceof the cost (being $1.41 per RPT unit) will be funded by transfer to the investor of aproportion of the Loan. The Bank’s recourse in the event of a default on the Loan is limitedto the assets of RPT including RPT’s share of RIT and any moneys of RPT to which theinvestors are entitled. This means each investor is not at risk for any more than theamount paid on application (being $1.00 per unit) and any moneys of RPT to which theinvestor is entitled.
Investors in RPT are deemed to have accepted transfer of the Loan and relatedestablishment costs, which has been arranged for them, by providing the applicationform and power of attorney. Interest on the Loan will be paid by the Trustee out ofinvestors’ entitlements to income and any capital distributions.
The minimum investment in RPT is 10,000 units and the minimum amount of cashpayable by investors on application is $10,000. The Loan amount arising from an investor’ssubscription of 10,000 units in RPT is $14,100 which includes associated borrowing costsof $263.
>
>
>
>
>>
Bank
Investors
Limited recourse loanthrough Centro Syndication
Finance Pty Ltd
Roselands Property Trust (RPT)
Roselands Investment Trust
Investors
Roselands HoldingTrust (RHT)
CentroProperties Group
Roselands Shopping Centre
OR
50% Ownership 50% Ownership
100% Ownership
>Limited recourse loanthrough Centro Syndication
Finance Pty Ltd
>
First ranking fixed andfloating charge over assets
and undertakings
11
>
The RHT Offer (see Section 6)
RHT has been established for those investors who are unable to, or who do not wish to,borrow in their own right (for example, superannuation funds).
The issue price of each RHT unit is $1.00 which must be paid in full by RHT investors onapplication. For each RHT unit subscribed for by RHT investors, the Trustee of RHT willinvest in RPT on the same terms as RPT investors and with the same level of borrowings(see above).
The minimum investment in RHT is 10,000 units and the minimum amount payable byinvestors on application is $10,000.
The Trustee may, at its absolute discretion, accept requests for conversion of investmentsin RPT units to investments in RHT units and vice-versa. If a request is accepted, theinvestors concerned will be required to pay any costs involved.
Risks
Investors should be aware that there are a number of risks associated with investing ineither RPT or RHT. These risks are set out in Section 9.
12
2. Roselands Shopping Centre
Overview
Roselands was one of the first regional shopping centres in Australia. It is a four level, fullyenclosed regional shopping centre with car parking for approximately 3,600 cars. Initialconstruction of the Property was completed in 1965, and since that time the centre hasbeen refurbished or extended a number of times with the last major works occurring in1993.
The Property comprises a Grace Bros department store, Coles supermarket, Targetdiscount department store, Franklins supermarket and approximately 151 specialty shops.
Being a regional shopping centre, Roselands dominates its Primary Trade Area (“PTA”) andshould continue to do so, with the existing competing centres being virtually fully developedand the potential for new major competition being limited.
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Key Features of the Property
Gross lettable area Grace Bros 24,052m2
Target 8,135m2
Coles 4,338m2
Franklins 2,011m2
Specialty Retailers 20,126m2
Office Suites 402m2
Total 59,064m2
Car park spaces 3,600
Major tenants leases Grace Bros 30 years expiring July 2026Target 20 years expiring July 2016Coles 18 years expiring June 2014Franklins 12.8 years expiring July 2006
Number of specialty shops 151
Leading specialty tenants Best & Less SussanKaties Jeans WestCommonwealth Bank LiquorlandLincraft Bakers DelightOPSM Just JeansKodak Express SanityANZ Tony BarlowAustralia Post Tandy ElectronicsSuzanne Grae Wendy’s
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Location
Roselands is located within the established suburb of Roselands in the Municipality ofCanterbury, approximately 14 kilometres south-west of the Sydney central business district.The region comprises densely populated residential accommodation serviced by a numberof major arterial roads, including King Georges Road and the M5 Motorway which links theouter south western suburbs to the region.
BANKSTOWN
ROSELANDSSHOPPINGCENTRE
N
HURSTVILLE
CANTERBURY
BURWOOD
PARRAMATTA
NORTHSYDNEY
SYDNEY
BONDI
COOGEE
SYDNEYAIRPORT
ROCKDALE
LA PEROUSE
BOTANYBAY
MENAI
CRONULLA
MAROUBRA
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Site Details
The site upon which the Property and associated car parking is erected has frontages tosome ten surrounding streets with the principal access being from King Georges Road.
The site is irregular in shape, comprised within 14 freehold Certificates of Title andoccupies 14.1 hectares.
Regional Shopping Centre Trading Patterns
The retail property sector comprising enclosed multi-tenanted shopping centres isclassified by size and composition into regional (largest), sub-regional and neighbourhoodcentres. Enclosed shopping centres in suburban areas were first developed in Australia inthe early 1960’s and have emerged as the most significant form of retail centre.
At the end of 1996, there was some 7.8 million square metres of regional and sub-regionalcentre retail floor space across Australia (excluding the Northern Territory and Tasmania).Enclosed regional and sub-regional shopping centres presently attract around 28 per centof total retail sales nationally.
Shopping patterns in Australia have continued to change in recent years, with the resultthat an increased share of national retail sales is now being conducted in regional shoppingcentres. In the early 1980’s approximately 11 to 12 per cent of retail sales in Australiancapital cities was expended in regional centres. Now, that market share has increased to16 per cent and major regionals are forecast by Jebb Holland Dimasi Pty Ltd to eventuallyachieve market shares of 20 to 25 per cent. The reasons for further rises include changesin trading hours, centre expansion and demographic change (cash rich/time poor shoppersand an ageing population base with high discretionary spending).
Canterbury Road
Motorway M5
Payten Road
King Georges R
oad
Bond
s R
oad ROSELANDS
SHOPPINGCENTRE
CarPark
CarPark
N
16
There has been a corresponding trend to incorporate a variety of additional non-retail usesinto major centres, including cinema complexes, international food courts, offices and otherentertainment and leisure amenities. Coupled with extended trading hours, Jebb HollandDimasi Pty Ltd believes that the position of the regional shopping centre in the Australianretail market will continue to strengthen.
A scarcity of greenfield sites to support new regional and large sub-regional centres hascontributed towards a trend of refurbishment and expansion of existing shopping centres,with future development potential becoming increasingly recognised as an importantcriterion for long term retail investment.
Roselands Trade Area (Source: Jebb Holland Dimasi Pty Ltd)
CHESTER HILL
BIRRONG
YAGOONA
CONDELL PARK
CHULLORA
LAKEMBA
ROSELANDSSHOPPINGCENTRE
EARLWOOD
BEXLEY NORTH
BEXLEYRIVERWOOD
PADSTOWREVESBY
PANANIA
HURSTVILLE
SOUTH HURSTVILLE
PENSHURST
MORTDALE
OATLEY
KAREELA
JANNALI
ILLAWONG
BANGOR
MENAI
Primary Trade Area
Secondary Trade Area
Roads
Kilometres1 3
CAMPSIE
BANKSTOWN
Shopping Centres
Sydney 14 km
s
N
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Socio Economic Profile
Population
The population of the Main Trade Area (“MTA”) for Roselands in 1996 was approximately276,000 persons. The MTA comprises a Primary Trade Area (“PTA”) from which the centredraws its strongest trade and a Secondary Trade Area (“STA”) in which it competes formarket share with other regional shopping centres. Its PTA comprised 103,600 persons.For the purposes of comparison Australian regional centres have an average PTApopulation of 70,000 persons and an average MTA population of 204,000. Roselandscomfortably exceeds those figures.
A comparison of Roselands’ MTA population with Australian regional centres is shownbelow:
The population in the MTA has been forecast by Jebb Holland Dimasi Pty Ltd to grow at0.5 per cent per annum from 1996 to 2001.
Population Characteristics
The population of the MTA is older and less affluent than the Sydney average. Homeownership is quite high and a high proportion of the population consists of peopleoriginating from overseas particularly from Europe, Middle East, North Africa and Asia.
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Primary0
50,000
100,000
150,000
200,000
250,000
300,000
Secondary Main Trade Area
Roselands Leading Regionals Australian Regionals
Performance
Retail Expenditure Levels
Total available retail spending in the MTA is estimated to be $1,849 million in 1998comprised as follows:
Trade Area Segment
Total available retail expenditure in the MTA is forecast by Jebb Holland Dimasi Pty Ltdto increase to $2 billion per annum by 2006. This is a substantial retail market, particularlytaking into account that Roselands is the only regional shopping centre in the MTA,although other external centres compete for part of the available market, as Roselandsdoes in their trade areas.
To June 1997, Roselands annual sales turnover was $223.2 million. After excluding nonretail items (consistent with ABS definitions) the retail turnover of the centre was $219.6million, comprised as follows:
Trade Area Segment
Existing Market Share
Roselands is currently achieving 9.3 per cent of the total available retail expenditure in theMTA, which is low compared to typical regional centre market shares of 16 per centnationally.
Roselands attracts 15.7 per cent market share of retail expenditure in its PTA, lower thanthe national average of 23 per cent. Roselands attracts 23 per cent of its business fromoutside its trade area which is also lower than the national average of 28 per cent.
PTA$679m37%
STA$1,170m
63%
Non-Food$845m46%
Food$1,004m
54%
Food$85.3m
39%
Non-Food$134.3m
61%STA
$63.7m29%
PTA$105.4m
48%
Outside MTA$50.5m
23%
19
These comparisons are indicative only. However, they can also be considered against theframework of MTA population for Roselands of 276,000 people compared with the averagefor Australian regional shopping centres of 204,000 people.
The Manager believes that these figures indicate that, despite the competition, there arereasonable grounds for considering that an improved and/or redeveloped Roselands couldachieve a higher market share than its current performance level.
Competition
The broad area of relevance to Roselands incorporates the Local Government Areas(“LGA”) of Bankstown, Canterbury, Hurstville and Sutherland, with a combined populationapproaching 600,000 persons. More than one regional centre is required to serve this vastpopulace and those that do include Bankstown Square, Hurstville Shoppingtown,Roselands, Burwood Shoppingtown and Miranda Shoppingtown.
Those competing most strongly with Roselands are Bankstown Square (4.3 km north west)and Hurstville Shoppingtown (5 km south east) both of which are similar in scale toRoselands. Together these three regional centres service the densely populated LGA’s ofBankstown, Canterbury and Hurstville comprising a population of approaching 400,000persons.
Miranda Shoppingtown (14 km south) is not in direct competition with Roselands becauseits trade area is mainly to the south of the Georges River.
Burwood Shoppingtown (9 km north) is not a strong regional shopping centre and, at thisstage, is not of strong competitive relevance. In the future, however, it is likely to beextended substantially and become more competitive with Roselands, particularly in thesecondary north sector of the Roselands trade area.
Both Bankstown and Hurstville are slightly larger than Roselands and they incorporate twodiscount department stores (“DDS”) compared to Roseland’s one, and more specialityretailers and more attractive food courts. These centres outperform Roselands, but arequite limited in terms of future development potential. In contrast, Roselands has potentialto possibly broaden its offering by increasing its range of specialty shops, adding a secondDDS and an attractive food court and entertainment area (possibly including cinemas).
As with most trade areas there is also a level of sub-regional competition in the region, butit is not excessive. Supermarket centres in the region are relatively weak and scope existsto improve the food offer at Roselands.
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Roselands F
loor Layout
Levels 3 & 4
Level 1 Floor Plan Level 2 Floor Plan Level 3 & 4 Floor Plan
21 EntranceExit
FoodCourt
Lift Escalator Carpark
Tenants
Tenancy Mix
Roselands offers a mix of major and specialty retailers providing fresh food and groceryshopping with a blend of comparison shopping and general merchandise.
The graphs below show the tenancy mix of major and specialty retailers by gross rentalincome and gross lettable area, as at April 1998.
Contribution to Gross Rental Income Tenancy Mix by Gross Lettable Area
Tenant Income
Roselands offers stable income through the major tenants and the large number of nationaland state retailers within the Property.
The Property is not dependent on the success of any one tenant. The largest exposure isto Grace Bros Department Store which represents approximately 7.85 per cent of theProperty’s current gross income.
Income from the Property could potentially increase if:
• CPI increases;
• population, retail expenditure and sales turnover in the primary and secondary tradeareas increase; and
• its market share of the retail spending in the catchment increases.
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Major Tenants
22%
National Operators
42%
NSW Operators
36%
Major Tenants
65%
National Operators
21%
NSW Operators
14%
Leases
Lease Expiry Profile
The lease expiry profile of the Property is as follows:
Lease Expiry Profile by Total Gross Lettable Area
Vacancies
Approximately 308 square metres, representing approximately 0.5 per cent of Roselands’total gross lettable area, is currently vacant.
23
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Vacant 1 2 3 4 5 6 7 8 9 10 11+Years to Expiry
Are
a m
2
0.5%
7.0%11.0%
5.0% 4.0% 5.0%0.5% 2.0%
0.0%3.0%
0.0%
62.0%
Major Tenant Lease Terms
Grace Bros
Area: 24,052 m2
Expiry: July 2026Options on Expiry: 10 years plus 10 yearsAnnual Base Rent: $1,312,318Turnover Rent: 2.25% of sales $46m - $50m
2.00% of sales $50m - $70m1.75% of sales over $70m
Current MAT: $45.19 million (to April 1998)Review Mechanism: Nil
Target
Area: 8,135 m2
Expiry: July 2016Options on Expiry: 5 years plus 5 years plus 5 yearsAnnual Base Rent: $1,050,759Turnover Rent: 2.50% of sales over $12mCurrent MAT: $21.06 million (to April 1998)Review Mechanism: Reviewed at end of each 5 years
to one-third of aggregate base rentand turnover rent in the previous 3 years
Coles
Area: 4,338 m2
Expiry: June 2014Option on Expiry: 5 years plus 5 years plus 5 yearsAnnual Base Rent: $415,155Turnover Rent: 2% x gross sales - (Base rent x 50)Current MAT: $34.97 million (to April 1998)Review Mechanism: Every 5 years to average of base rent
plus turnover rent
Franklins
Area: 2,011 m2
Expiry: July 2006Option on Expiry: nilAnnual Base Rent: $370,959Turnover Rent: 1.50% of sales exceeding base rent
plus outgoingsCurrent MAT: $26.29 million (to April 1998)Review Mechanism: Reviewed to average of base rent
plus turnover rent for each of the2 years prior to 1998 and 2003.
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Trading Performance
To April 1992 the MAT for Roselands was $198 million. For the year ended April 1998 MATwas $228.4 million. These figures are evidence of the solid trading position of Roselands.
Sales turnover for the major and specialty tenants for the year to April 1998 was comprisedas follows:
Property’s Annual Sales Turnover
In order to provide investors with an indication of the Property’s historical sales turnoverperformance the following table details the annual unaudited reported sales turnover toApril each year from 1992.
Category 1992 1993 1994 1995 1996 1997 1998
Majors ($M)DDS/ Dept. Stores 72.4 71.0 65.6 64.9 64.2 65.7 66.2Supermarkets 47.3 49.2 52.8 53.9 54.6 60.9 61.3
119.7 120.2 118.4 118.8 118.8 126.6 127.5
Specialties ($M) 78.3 85.8 93.8 94.5 95.7 96.7 100.9
Total ($M) 198.0 206.0 212.2 213.3 214.5 223.3 228.4
Specialty Tenants$100.9m
44%
Major Tenants$127.5m
56%
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Customer Traffic
7.94 million persons visited the Property to the year ended April, 1998. This represents anincrease of 8.4 per cent over the previous year.
Occupancy Costs
In terms of occupancy costs at Roselands, gross rates for retail specialty shops includingservices in 1998 averaged approximately $900 per sq. metre compared with Australianregional averages of $1,047 per sq. metre and leading regional averages of around $1,200per sq. metre. For Roselands, occupancy costs represented 13.8 per cent of turnover.
This ratio compares with averages of 14.7 per cent for Australian regional centres and 15.2per cent for leading Australian regional centres.
Occupancy Costs
Access and Parking
Roselands is accessible via a number of entry and exit points. Parking for approximately3,600 cars is provided to the Property.
Roselands is used as a bus interchange by all local bus operators providing a strongsource of customers to the centre.
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Roselands Australian Regional Centres Leading AustralianRegional Centres
13.5%
14.0%
14.5%
15.0%
15.5%
13.8%
14.7%
15.2%
Proposed Property Enhancement
The Manager believes Roselands to be trading soundly at the present time.However, a number of areas have been identified which are in need of some attention.They include the following:
• vehicular passage in various sections of the carpark areas is unnecessarily slowand traffic flow is therefore inefficient. The Manager proposes changes to theroad pattern and the installation of roundabouts to enhance traffic flow;
• upgrading of ceilings in various sections of the mall area;
• render and painting of the north, south and western external facades to elevatethe external appearance of the centre;
• new entry statements to the Coles supermarket mall and carpark deck entries;and
• various improvements to the services and structure of the centre including:
• carpark lighting;
• electrical systems;
• carpark stormwater flow;
• air handling units upgrade; and
• other mechanical/hydraulic and building regulatory compliance items.
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Within the forecasts contained in this prospectus, the Manager has included 50 per cent ofthe following capital expenditure to undertake these and other capital works within thecentre.
1998/1999 $1,975,000
1999/2000 $2,075,000
2000/2001 $300,000
2001/2002 $300,000
2002/2003 $150,000
2003/2004 $150,000
Manager’s Strategy
The Manager, as a member of the Centro Properties Group, will bring to the centre awealth of retail management and development expertise to invigorate the centre in anendeavour to allow Roselands to increase its market share of retail expenditure in its tradearea.
The strategy adopted aims to improve the investment potential of the centre by undertakinga series of value adding initiatives to enhance the performance of the centre. Theseinitiatives include the following:
• the centre currently offers redevelopment and expansion opportunities as it does notprovide the full range of major retailers offered by its regional competitors in Sydney.The Manager intends to utilise this issue by endeavouring to provide a hard goodsDiscount Department Store to complement the existing Target. This development is inthe medium term and will also provide the opportunity to maximise the under-utilisationof the carpark to the south of the centre;
• foodcourts are an important part of regional shopping centres and this is an excitingopportunity for Roselands. In particular, the foodcourt should be upgraded to provideadded incentive for shoppers to visit the centre and stay for longer periods therebyincreasing the dollar spend per customer visit;
• a major trend in regional shopping centres has been the inclusion of entertainment andrelated opportunities. The provision of a multi-cinema complex will be investigated toimprove the entertainment offer of the centre whilst maintaining the favourablerecognition the centre enjoys in the market for being safe, friendly and appealing tofamilies;
• the supermarkets in the centre outperform the national averages and this presentsopportunities in the food offerings. For example, Franklins wishes to expand its store toinclude a fresh food component. The Manager intends to further improve the currentfood and convenience offering in the centre to improve its primary market share;
• the centre will be brought within the Centro Properties Group’s national marketingumbrella to provide more effective marketing. This should improve its market sharethrough stronger promotion in an endeavour to improve sales for retailers; and
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• the Manager proposes to upgrade the external façade of the centre which will elevate itsappearance and project a modern and welcoming presence. Some areas of the malland entry statements are proposed to be upgraded to improve the ambience andpresentation to shoppers.
Centre Potential
As set out previously, the Manager believes that returns from Roselands may be enhancedby the completion of an appropriate redevelopment. Based on an initial, and thereforepreliminary review of the expansion potential of Roselands, the Manager has identified thefollowing areas of possible redevelopment:
• upgrading of the existing food court, plus the expansion of the entertainment offerings;
• a more substantial extension including the addition of a new discount department storeand specialty shops; and
• inclusion of cinemas.
Whether the Manager undertakes any or all of these, or other opportunities, is highlyuncertain at this stage and contingent on a number of factors including:
• the availability of planning and other relevant approvals;
• appropriate discussions with existing and future tenants; and
• a detailed financial analysis.
Should the Manager determine that it is appropriate to undertake a redevelopment, it islikely that it would be funded through a combination of additional debt and equity. Ifadditional equity is required, investors would be offered equity participation in theredevelopment via a rights issue at that time.
The Manager would only consider undertaking a significant redevelopment if it believed thedevelopment would be in the best interests of investors.
No capital expenditure or additional income from these opportunities has been included inthe forecasts in this prospectus.
Potential for Capital Gains
Roselands offers investors a relatively stable income stream derived from the majortenants and national specialty retailers which is forecast to be partially tax advantaged.The Property could potentially increase in value if:
• sales turnover of the major and specialty tenants continues to increase;
• operating expenses of the Property are reduced in real terms;
• the general retail property market, and in particular the Canterbury retail propertymarket, improves;
• demand for retail properties exhibiting stable income streams increases; and
• the potential for future expansion of the Property is realised.
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3. Financial Information
This Section provides details of the:
• forecast performance of RPT and RHT;
• taxation implications for investors in RPT;
• taxation implications for investors in RHT;
• sources and applications of funds associated with the RPT and RHT Offers; and
• an indication of possible internal rates of return to investors.
The Manager’s forecasts have been adopted to provide investors with a guide to thepotential future performance and distributions of the Trusts based upon the achievement ofcertain economic, operating, development and trading assumptions about future eventsand actions that have not yet occurred and may not necessarily occur. There is a consider-able degree of subjective judgement involved in the preparation of forecasts particularlywhere prospective financial information has been prepared in relation to financial periodsseveral years into the future.
Investors should refer to the key assumptions and accounting policies on which the fore-casts are based and the risks of investing in the Trusts (refer to Sections 3 and 9).
Forecast Distribution for RPT
Set out below are the RPT forecasts for the year to 30 June 1999 and for each successiveyear up to 30 June 2004.
Year ending 30 June 30 June 30 June 30 June 30 June 30 June ($’000) 1999 2000 2001 2002 2003 2004
IncomeNet property income 7,573 7,918 8,154 8,433 8,725 9,069Interest income 77 124 131 124 116 114
Total income 7,650 8,042 8,285 8,557 8,841 9,183
ExpensesManager’s fees - 119 501 517 534 555Other expenses 122 139 145 150 157 163Interest expense (1) 3,526 3,600 3,646 3,666 3,683 3,699
Total expenses 3,648 3,858 4,292 4,333 4,374 4,417
Net operating income 4,002 4,184 3,993 4,224 4,467 4,766Transfer (to) fromretained earnings (852) (22) 268 237 193 176
Distribution to unitholders 3,150 4,162 4,261 4,461 4,660 4,942
Opening retained earnings 0 852 874 606 369 176Transfer to (from)retained earnings 852 22 (268) (237) (193) (176)
Closing retained earnings 852 874 606 369 176 0
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Year ending 30 June 30 June 30 June 30 June 30 June 30 June ($’000) 1999 2000 2001 2002 2003 2004
Distribution (cents per unit) 7.91 10.45 10.70 11.20 11.70 12.41Distribution yield 10.00%(2) 10.45% 10.70% 11.20% 11.70% 12.41%Estimated ManagementExpense Ratio (3) 0.18%(4) 0.28% 0.67% 0.67% 0.67% 0.67%
(1) Other than for the period to 15 September 1998, interest expense is an expense of investors in RPT. Theexpense will be met by the Trustee out of RPT distributions.
(2) Annualised yield on equity subscribed from the Closing Date of the offer which is 15 September 1998. Unitsallotted prior to that date will not be entitled to a higher distribution. Investors whose units are allotted prior to 15September 1998 will be entitled to interest at a rate of 10.0 per cent per annum for the period between the datesof allotment and 15 September 1998.
(3) Management expense ratio includes Manager’s and Trustee fees and all other expenses (excluding interest)incurred by investors in RPT and RHT.
(4) Annualised and including capitalised management costs.
Forecast Distribution for RHT
The net forecast distribution and return on equity subscribed by RHT unitholders will beidentical to that forecast for RPT unitholders as set out above.
Forecast Pro Forma Balance Sheet for RPT
Set out below is a forecast pro forma balance sheet of RPT as at 15 September 1998.
15 September 1998$000’s(1)
Assets
50% interest in Roselands (2) 90,250Cash at bank -
90,250
Liabilities -
Net Assets 90,250
Unitholders’ Equity
Proceeds of the RPT Offer 95,067Less: Write off of issue expenses (3) 4,817
Total Unitholders’ Equity 90,250
Number of fully paid units 39,830
NTA per fully paid unit $2.27
(1) 15 September 1998 is the expected date for transfer of the limited recourse Loan from RPT to investors.(2) Via a 50 per cent interest in RIT. Expenses total approximately $0.25 million and include acquisition costs and
due diligence costs.(3) Including establishment costs, legal fees and underwriting expenses.
Assets and Liabilities of RHT
The only significant asset in RHT will be RPT units. For every RHT unit issued, RHT willsubscribe for one RPT unit on the same terms as other RPT investors. Other than inrespect of its proportionate share of the limited recourse Loan, RHT will have no significantliabilities as at 15 September 1998.
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Key Accounting Policies
The foregoing information in this Section has been prepared in accordance with the trustdeeds for RPT and RHT and Australian accounting standards. The principal policies aredescribed below.
(a) Calculation of Distributable income
Distributable income is calculated on an accruals basis of accounting and includes allincome derived by the trust after deducting trust expenses. All expenses of RHT, otherthan interest payable on the Loan, will be borne by RPT.
(b) Income Tax
Under current tax legislation, RPT is not liable for income tax provided unitholders arepresently entitled to all the income of the trust each year.
(c) Depreciation of buildings, plant and equipment and incentive amortisation
RIT does not charge depreciation on buildings, plant and equipment or amortise leaseincentives. The interests in building, plant and equipment are held by RIT as an investmentproperty, and so are continually maintained as stipulated in the RIT trust deed. RPTaccounts for distributions received on this basis.
(d) Investments
The units in RIT held by RPT are initially brought to account at cost which includes thecosts of acquisition. Costs of acquisition include the Manager’s estimate of stamp dutyand fees for professional services incurred by the Manager and reimbursed by RPT.
The costs of any subsequent development and refurbishment of the Property, includingfinancing charges incurred during the period of development or refurbishment, will becapitalised.
It is the Manager’s intention that the Property be revalued every year from 30 June 2000.The revaluations of Roselands will not take account of any potential capital gains tax.
Increments arising from the revaluation of Roselands will be transferred directly to an assetrevaluation reserve, except to the extent the increments reverse a revaluation decrementpreviously recognised as an expense in the profit and loss account, in which case they willbe recognised as revenue in the profit and loss account for the period. Decrements fromrevaluations will be brought to account in calculating the operating profit or loss for theperiod and then transferred to an asset revaluation reserve before arriving at a distributableamount except to the extent that the revaluation decrement reverses a previous incrementin which case the decrement will be taken directly to an asset revaluation reserve.
(e) Distribution per unit
Subject to the income entitlements of any units issued other than under this prospectus,the distribution per unit will be determined by dividing the total distribution for the givenperiod by the number of units eligible for distribution on the last day of the accrual period.
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Key Assumptions
The Manager’s distribution forecasts and total return calculations have been preparedbased on various assumptions. Investors should appreciate that many factors which affectresults may be outside the control of the Manager or may not be capable of being foreseenor accurately predicted. As such, actual results may differ from the forecasts. Significantassumptions are outlined below and relate to 100 per cent of the Property:
Property
• rents for all tenants are effectively assumed to increase in accordance with theprovisions of the leases. CPI increases are based on forecasts provided by AccessEconomics Pty Ltd over the next six years of nil, 2.9 per cent, 3.5 per cent, 2.3 per cent,1.6 per cent and 3.2 per cent respectively;
• sales turnover during the forecast period is assumed to increase at an average of:
• 1.5 per cent per annum for Grace Bros;
• 2.1 per cent per annum for Target;
• 4. 3 per cent per annum for Coles; and
• -0.5 per cent per annum for Franklins;
• specialty retailer market rentals are assumed to increase at 3.1 per cent in year one, 4.6per cent in year two, 3.2 per cent in year three, 3.8 per cent in year four, 3.8 per cent inyear five and 4.4 per cent in year six;
• in forecasting property income, the current rental and rent review provisions in respectof each tenancy were analysed and adjustments made to the passing rents to reflectanticipated variations on rent reviews. These were based on the Manager’s estimate ofmarket rentals at the relevant time;
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• there are five existing vacant shops totalling 308 square metres representingapproximately 0.5 per cent of the total gross lettable area. It has been assumed thatthese shops will be leased at market rentals between January and June 1999;
• where a tenancy is due to expire, allowance has been made in some cases for a loss ofrental over the re-letting period, and in other cases for the tenant to renew. Allowancehas been made for the new rental to reflect the Manager’s estimate of market rentalsand leasing costs at the relevant time;
• outgoings expenditure is forecast to increase in accordance with the aforesaid CPIprojections;
• non-recoverable expenditure, which includes the owner’s contribution to the Property’spromotion fund, is forecast to grow at the aforesaid CPI projections;
• an expenditure allowance totalling $7.1 million has been included in the forecast periodfor lease incentives and items of a discretionary capital nature. It is intended that theseworks will be substantially funded through borrowings. The forecasts assume that theinterest rate on these borrowings will be the same rate as the Loan (see page 40);
• the forecasts have been prepared on the assumption that no further expansion of theProperty will occur in the forecast period and there will be no additional propertyacquisitions;
• it is assumed that the valuation of the Property at the next revaluation date will besufficient to at least cover the acquisition costs of the interest in RIT which have beencapitalised. See footnote (2) in the pro forma balance sheet for RPT on page 32; and
• it is assumed that the value of RPT’s 50 per cent holding in RIT reflects the value of50 per cent of Roselands and that such valuation is not materially affected by the pre-emptive rights contained in the Joint Venture Agreement (summarised in Section 14).
Funding
• a 5 year interest rate swap covering $58.5 million at a rate (including bank margin) of6.2 per cent per annum has been entered into on behalf of unitholders in RPT. Intereston any additional debt, plus all debt in the balance of the forecast period is assumed tobe at the same rate.
Trust expenses
• the Manager will be entitled to receive management fees as set out on page 47;
• the Trustee will be entitled to receive the fees set out on page 47; and
• administration costs - the Manager is entitled to be reimbursed by RPT for all expensesand liabilities properly incurred in establishing, managing and administering RPT, RHTand the borrowings. These expenses include costs incurred in acquiring, valuing,holding or disposing of investments; engaging agents or delegates; issuing units;amending the trust deeds of the Trusts; taxes; establishing and maintaining registersand accounting records; convening and holding meetings; marketing the Trusts andpreparing legal documentation. These costs are estimated at 0.13 per cent of the initialgross assets of RPT and are assumed to escalate at between 2.4 per cent and 4 percent per annum.
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Tax Implications for Investors in RPT
The table below shows the forecast gross distribution, interest expense deduction andamount of tax deferred and tax free portion of the distribution per unit in the forecastperiod.
Where unitholders hold their investment on capital account, the cost base for capital gainstax purposes will be approximately $2.38 per unit. Under the current tax legislation, andassuming that the investment is held for at least 12 months, the cost base will be increasedby the CPI each quarter, and reduced by the tax deferred component of distributions, untilthe investment is sold, the holding is converted into Centro Stapled Securities or the Trustis terminated. For further details regarding the tax implications of investing in RPT refer tothe Taxation Opinion in Section 12.
RPT Period to Period to Period to Period to Period to Period to(cents per unit) 30 June 30 June 30 June 30 June 30 June 30 June
1999 2000 2001 2002 2003 2004
Gross distribution toRPT unitholders 16.76 19.49 19.86 20.40 20.95 21.70
Less loan interest expense (8.85) (9.04) (9.16) (9.20) (9.25) (9.29)
Distribution to unitholdersnet of loan interest expense 7.91 10.45 10.70 11.20 11.70 12.41
Tax deferred and tax free portion (2.53) (2.81) (3.46) (3.29) (3.10) (2.44)
Assessable income 5.38 7.64 7.24 7.91 8.60 9.97
Taxation Implications for Investors in RHT
Investors who elect to invest in RHT will receive a distribution on their RHT units afterpayment of interest on funds borrowed by the Trustee of RHT to fund the purchase ofRPT units. This distribution is forecast to be partially tax advantaged consistent withdistributions to RPT investors, as detailed in the table above.
Under current tax legislation, RHT is not liable for income tax provided unitholders arepresently entitled to all the distributable income of the Trust each year.
Where unitholders hold their investment on capital account, the cost base for capital gainstax purposes will be $1.00 per RHT unit. Under current legislation, assuming theinvestment is held for a least 12 months, the cost base will be increased by CPI eachquarter, and reduced by the tax deferred component of the distribution, until the investmentis sold (including through the Exit Mechanism) or RHT is terminated. For further details onthe tax implications of investing in RHT refer to the taxation opinion in Section 12.
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Total Returns
The total return for investors is dependent on the distributions received by them and theamount received on realising their investment. As there is unlikely to be a secondarymarket for trading of units, generally investors will realise their investment through eitherthe Exit Mechanism, or through the sale of RPT’s 50 per cent interest in RIT. Accordingly,investors’ total returns will be sensitive to the valuation of Roselands at the time of realisingthe unit holding through the Exit Mechanism, or at termination, the price at which theholding in RIT is sold.
RPT acquired its 50 per cent indirect interest in Roselands at an effective initial passingyield of approximately 8.5 per cent (ie assuming normal acquisition costs). If the Propertywas valued on the same yield in June 2004 (based on the Manager’s current forecast ofincome for the year ended June 2005), the estimated internal rate of return (“IRR”) toinvestors (pre-tax) over the forecast period ending 30 June, 2004 would be 14.2 per cent.The graph below demonstrates the resulting IRR at differing sale price assumptions.
SALE PRICE SENSITIVITY ANALYSISImpact on IRR assuming sale at the end of forecast period
The selected ranges for the calculations are intended to provide investors with an exampleof the potential impact on the IRR of the valuation of Roselands at conversion, or if RPTsells its investment in Roselands (via RIT) at June 2004, the price for which this 50 percent interest in Roselands is sold. It is possible that the actual sale price may exceed orbe less than the range considered with a corresponding favourable or unfavourable impacton total returns.
Investors should note that the figures shown are purely for illustrative purposes, and theManager does not purport to be making a forecast of the likely sale price, or that theProperty will be sold at that time.
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99,3009.50%
10%
11%
12%
13%
14%
15%
16%
17%
18%
104,8009.00%
111,0008.50%
117,9008.00%
125,8007.50%
Sale price before costs ($'000)(Sale Yields)
Inte
rnal
Rat
e of
Ret
urn
Sources and Applications of Funds for RPT and RHT Offers
The forecast sources and applications of funds in respect of the RPT and RHT Offers andthe acquisition of Roselands, via RIT, is set out below.
Application monies for RHT Units will be used by the Trustee of RHT to subscribe for unitsin RPT.
All costs associated with the RHT Offer will be funded through the proceeds of the RPTOffer and have been included in the estimates below.
Sources $’000 Applications $’000
Investors
Equity subscriptions 39,830 Loan arrangement fees and other associated costs 1,048
Loan from bank 56,285 Subscription for units in RPT 95,067
96,115 96,115
Roselands Property Trust
Equity subscriptions 95,067 Acquisition of 50% of units in RIT 90,250
(after associated loan Syndicate costs (1) 350
arrangement costs) Advisory and underwriting fee 3,600
Other establishment fees 742
Due diligence and prospectus preparation costs 125
95,067 95,067
(1) Including legal fees and other syndicate costs.
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4. Roselands Property Trust: Details of the Offer
RPT is open to investors resident in Australia wishing to invest in Roselands and leveragetheir investment with borrowings.
The RPT Offer
39,830,000 units in RPT are being offered for subscription. The issue will raise a totalof approximately $95.1 million (including debt funding on behalf of investors and afterassociated Loan arrangement costs). The issue has been fully underwritten by WarburgDillon Read.
Period of RPT Offer
The RPT Offer will open for receipt of applications on 15 July 1998 and close at 5:00 pmEST on 15 September 1998.
The Issue Price
The cost of each RPT unit is $2.41. Of this amount, investors need only pay $1.00 per uniton application. The balance of the cost of approximately $1.41 will be paid for by transferto the investor of a limited recourse Loan (arranged by the Manager on behalf of investors)of which approximately $0.03 represents loan establishment fees. The investors’ gearinglevel in respect of their units will be approximately 58 per cent.
The Loan
Loan Arrangements
The Manager has arranged a Loan of $56.3 million to Centro Syndication Finance Pty Ltdas agent for RPT initially, from the Commonwealth Bank. The Loan will be transferred toinvestors to initially fund the balance owing on investors’ units (being approximately $1.38per RPT unit and associated Loan arrangement costs of approximately $0.03). CSF willarrange for the transfer of the Loan as agent for investors (under the power of attorneygiven by investors (including RHT)) on or about 15 September 1998 but which may beextended by the Manager. Further details of the Loan are set out in Section 14.
The Manager may arrange for the Loan to be amended with agreement of relevant parties,or refinanced from time to time.
Limited Recourse Loan
The Loan to investors is secured by a first ranking fixed and floating charge over theassets and undertakings of RPT, subject to certain minor exclusions. The Bank’s recoursein the event of a default is limited to the assets of RPT (including RPT’s share in RIT) andany moneys in RPT to which the investors are entitled. This means investors are not at
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risk for any more monies than the equity subscribed by them on application (being $1.00)per RPT unit and any moneys in RPT to which the investors are entitled. Further details ofthe loan are contained in Section 14.
The amount of each investor’s liability may vary over time, depending on the proportion ofunits held, changes in gearing or additional financing.
Term of the Loan
The loan is for a term of five years and 3 months, commencing from 1 July 1998.
Interest Rate
The Manager has entered into a 5 year interest rate swap over $58.5 million at a total cost(including bank margin) of 6.2% per cent per annum.
Repayment of the Loan
The Loan is an interest only loan. Principal can be repaid (and redrawn) and theoutstanding principal must be repaid at the end of the term.
Interest is payable by the Trustee out of investors’ entitlements to any moneys of RPT.
Loan Administration
RPT investors are required to give CSF a power of attorney to act on their behalf in relationto the Loan and other matters. The power of attorney form is attached to the GREENapplication form to be found on page 101 of the prospectus.
Bank
Roselands Property Trust (RPT)
Roselands Investment Trust
INVESTORS
Roselands Shopping Centre
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50% Ownership
100% Ownership
Limited recourse loanthrough Centro Syndication
Finance Pty Ltd
First ranking fixed andfloating charge over assets
and undertakings
Dealing Restrictions
RPT investors must not give (or have given) security in respect of, or otherwise deal with,RPT units in a manner which would prejudice the payment of interest and principal to theBank under their share of the loan out of their entitlements to the income and capital ofRPT in accordance with this prospectus. Under the trust deed of RPT, if an RPT investorfails to comply with this condition, that investor’s entitlement to the income and capital ofRPT is liable to be forfeited.
Loan Arrangement Fees and Other Associated Costs
The Loan arrangement fees and other associated costs are funded via the Loan arrangedby the Manager on behalf of investors. These costs are tax deductible to the investor andcan be claimed as a deduction in equal instalments over the life of the loan (5 years).
The benefit of this deduction is reflected in the forecast tax advantaged percentages setout on page 8.
Allotment
Subject to the Manager’s right to allot less than the number of RPT units applied for,allotment will occur shortly after receipt of subscriptions. Investors waive their right toreceive notice of allotment. The Manager, in consultation with the Underwriter, reservesthe right to allot less than the number of RPT units applied for, or to decline any applica-tion. In those cases, any surplus application money will be returned to the applicantwithout interest as soon as practicable after 15 September 1998. Interest will be paid bythe Underwriter to investors at a rate of 10.0 per cent per annum on equity funds receivedwhere units have been allotted. This interest will be payable during the period between thedate of allotment of the units and 15 September 1998.
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42
5. Roselands Property Trust: How to Invest
Application for RPT Units
• RPT Offer opens -15 July 1998
• RPT Offer closes - 5:00 pm EST on 15 September 1998
Applications for units under the RPT Offer will only be accepted on the GREEN applicationform attached to this prospectus. Investors must also complete the power of attorney formattached to the GREEN application form. Cheques should be made payable to “TrustCompany of Australia Limited - RPT” and crossed “Not Negotiable”.
The completed GREEN application and the power of attorney forms must be forwarded tothe Sydney office of Coopers & Lybrand Securities Registration Services by 5:00 pm ESTon 15 September 1998. Investors may use the reply paid envelope enclosed.
Minimum Investment
The minimum investment in RPT is 10,000 units such that the minimum amount payable byinvestors on application is $10,000. Applications for more than 10,000 units must be inmultiples of 1,000. Examples of the relevant equity contribution and the loan amount andassociated arrangement costs associated with an investor’s application are shown below.
No. of RPT units Equity Approximate Loan Approximate Total loan amountapplied for by an subscribed by an amount applied Borrowing Cost associated with an
investor in vestor on to relevant trust associated with an in vestor’sapplication units (being investor’s application (being
(being $1.00 per appro ximately application (being approximatelyunit) $1.38 per unit) $0.0263 per unit) $1.41 per unit)
10,000 $10,000 $13,837 $263 $14,100
50,000 $50,000 $69,185 $1,315 $70,500
100,000 $100,000 $138,370 $2,630 $141,000
500,000 $500,000 $691,850 $13,150 $705,000
1,000,000 $1,000,000 $1,383,700 $26,300 $1,410,000
Payments
Cheques will be deposited on the day of receipt. Sufficient cleared funds should be held inyour account as dishonoured cheques may result in your application being rejected.Receipts for payment will not be issued.
Confirmation of Investment
Investors will receive a statement, similar to a bank statement, setting out the number ofunits allotted to them and the amount of their share of the loan. Unit certificates will not beissued.
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6. Roselands Holdings Trust: Details of the Offer
RHT has been established for investors resident in Australia who are unable, or who do notwish to, borrow in their own right to invest in RPT (for example, complying superannuationfunds).
The RHT Offer
The issue price is $1.00 per unit payable in full by investors on application. For each RHTunit subscribed for by investors, the Trustee of RHT will subscribe for one unit in RPT onthe same terms as other investors in RPT. This means that the Trustee of RHT, rather thanRHT investors, will borrow the balance of the issue price of RPT units and associated loanestablishment fees of $1.41 per RPT unit by novation of the limited recourse Loan arrangedby Centro Syndication Finance Pty Ltd (see Section 14). Investors in RHT will have noliability for any borrowings undertaken by the Trustee of RHT.
The structure of the RHT offer is shown in the following diagram:
Period of RHT Offer
The RHT Offer will open for receipt of applications on 15 July 1998 and close at 5:00 pmEST on 15 September 1998.
Allotment
The Manager reserves the right to allot less than the number of RHT units applied for, or todecline any application. In those cases, any surplus application money will be returned tothe applicant without interest as soon as practicable after 15 September 1998. Interest willbe paid to investors by the Underwriter at a rate of 10.0 per cent per annum on equityfunds received where units have been allotted. This interest will be payable during theperiod between the date of allotment of the units and 15 September 1998.
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Roselands Property Trust (RPT)
Roselands Investment Trust
INVESTORS
First ranking fixed andfloating charge over assets
and undertakings
Roselands Shopping Centre
50% Ownership
Roselands Holdings Trust (RHT)
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Limited recourse loanthrough Centro Syndication
Finance Pty Ltd
>100% Ownership
7. Roselands Holdings Trust: How to Invest
Application for RHT Units
• RHT Offer opens - 15 July 1998.
• RHT Offer closes - 5:00 pm EST on 15 September 1998.
Applications for units under the RHT Offer will only be accepted on the GREY applicationform attached to this prospectus. Cheques should be made payable to “Trust Company ofAustralia Limited - RHT” and crossed “Not Negotiable”.
The completed GREY application form must be forwarded to the Sydney office of Coopers& Lybrand Securities Registration Services by 5:00 pm EST on 15 September 1998.Investors may use the reply paid envelope enclosed.
Minimum Investment
The minimum investment in RHT is 10,000 units such that the minimum amount payable onapplication is $10,000. Applications for more than 10,000 units must be in multiples of1,000.
Payments
Cheques will be deposited on the day of receipt. Sufficient cleared funds should be held inyour account as dishonoured cheques may result in your application being rejected.Receipts for payment will not be issued.
Confirmation of Investment
Investors will receive a statement, similar to a bank statement, setting out the number ofunits allotted to them. Unit certificates will not be issued.
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8. Information for Investors
Long Term Investment
Investment in RPT and RHT should be viewed as long term. Units in the Trusts are likely tobe illiquid as there is unlikely to be a secondary market.
RPT and RHT will terminate after six years (unless all unitholders otherwise agree). Aftersix years, investors will be able to sell (or “put”) their units to Centro at the then current unitvalue. If any units are put, Centro may buy (or “call”) all investors’ units at the same price.In either case, the consideration paid to investors will be in the form of cash, CentroStapled Securities (issued at a 0.5 per cent discount), or any combination thereof, atCentro’s election.
Investors should note that their “put” option will not be available if at the time of exercise theBank is entitled to call for immediate repayment of the Loan. Details of the circumstancesin which this could occur are set out in Section 14.
If Centro does not acquire all of the RPT and RHT units held by investors as describedabove, RPT’s 50 per cent holding in RIT will be offered for sale on the market for threemonths. Investors should note that under the Joint Venture Agreement between RPT andthe Centro Properties Group (as holder of the other 50 per cent holding in RIT), Centro hasa pre-emptive right to match any offer received from a third party.
If no offer is received within the three months selling period, Centro has the right topurchase RPT’s 50 per cent holding in RIT based on the June 2004 valuation of theProperty. If Centro does not do so, the 50 per cent holding will continue to be marketeduntil sold. The net proceeds (after allowing for expenses and repayment of the Loan) willbe distributed to investors in proportion to their unitholdings.
Income Distribution
RPT will make half yearly income distributions. The Manager and Trustee will pay interestamounts owing by RPT investors relating to their portion of the Loan out of their RPTincome entitlements. The balance of the distribution entitlement, after adjustments forretained earnings, will then be distributed to RPT investors. The Manager intends thatdistributions will be paid within six weeks from the end of the relevant distribution period.
RHT will also make half yearly income distributions.
RPT and RHT investors may elect to have their income distributions paid by cheque or paiddirectly into a nominated bank, building society or credit union account within Australia.
Property Valuation
The Manager of RIT intends to value Roselands at 30 June 2000 and annually thereafter.
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Manager’s Fee
CPT Manager Limited will be entitled to a management fee of 1 per cent per annum of thevalue of RPT’s gross assets which is payable quarterly. The Manager has agreed to waive50% of the fee during the period of the Trust. In addition, the Manager has agreed to waivethis adjusted fee payable for the period up to 30 June 1999 and 75 per cent of it for theperiod from 1 July 1999 to 30 June 2000. No management fee will be charged in relation toRHT.
Performance Fee
If following the sale of RPT’s 50 per cent interest in RIT, or on exercise of the ExitMechanism, the amount available to be paid to investors (after allowing for disposalexpenses, and repayment of the Loan), is greater than the amount of equity subscribedby them (“the excess”), then the Manager will be entitled to a performance fee based onthe following scale:
• if the excess is equal to or less than 30 per cent of the equity subscribed by investors,the Manager will be entitled to receive a fee out of the excess equal to 1 per cent of therealised value of the RPT units;
• if the excess is equal to or less than 50 per cent of the equity subscribed by investors,but greater than 30 per cent of the equity subscribed by investors, the Manager will beentitled to receive a fee out of the excess equal to 1.5 per cent of the realised value ofthe RPT units; and
• if the excess is more than 50 per cent of the equity subscribed by investors, theManager will be entitled to receive a fee out of the excess equal to 2.5 per cent of therealised value of the RPT units.
The above performance fee will be reduced to the extent necessary to ensure thatpayment of it does not result in investors receiving an amount which is less than the equitysubscribed by them.
Trustee’s Fees
The Trustee will be entitled to receive an establishment fee of $25,000 (which has beencapitalised by the Trust) followed by a fee of $15,000 per annum from RPT.
The Trustee will also be entitled to receive an annual fee of up to 0.25 per cent of the valueof RIT’s gross assets as trustee of RIT, of which RPT (as holder of 50 per cent of RIT) willbear 50 per cent. This fee has been reduced to approximately 0.04 per cent of the value ofRIT’s gross assets for the purpose of the financial forecasts included in this prospectus. Afee of up to $40,000 is payable to the Trustee in the event of the winding up of RPT andRHT or the retirement of the Trustee from the Trusts.
The above fees are in addition to any other fees which the Trustee may earn as Trustee ofRIT.
No other fee will be charged by the Trustee in relation to RHT.
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Reporting
Investors will be provided with the following reports:
• half-yearly income distribution statements;
• annual report and audited accounts for each financial year ending 30 June; and
• a tax statement for each financial year ending 30 June showing all the details requiredto complete an Australian tax return.
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9. Investment Risks
Property
Investors should be aware that the future level of RPT’s and RHT’s income and capitaldistributions and investors’ total returns may be influenced by a number of factors, includingthose outside the control of the Manager and the Trustee. These factors include forecastassumptions not occurring, the level of tenancy vacancies, tenants failing to pay rent,interest rate movements, the sale price of Roselands, the future value of Roselands, capitalexpenditure, unidentified latent conditions, rental and tenant incentive variations, expensesof the Trust, ability to recover expenses from tenants, demand for retail properties, generalproperty market and economic conditions. In addition, RPT is exposed to a specificproperty (that is, Roselands). As such, RPT and RHT will also be affected by changes inthe demographics, socio-economic factors, competition and other matters specific toRoselands’ trade region.
Liquidity
The investment in RPT and RHT can be considered to be illiquid. For the duration of theTrusts, no unitholder has the right to redeem units. Neither the Manager nor the Trustee ispermitted to buy back units in the Trusts. There is unlikely to be a secondary market for theunits in RPT or RHT. As described above, after six years investors will have the right to selltheir unitholding, based on the current unit value at the time, to Centro. This right is subjectto there being no event of default under the Loan at the time of exercise.
Fixed Term
RPT and RHT have a fixed term of 6 years (ie from 30 June 1998). RPT will terminate in6 years (ie 30 June 2004) unless terminated earlier by the Manager or by special resolutionof unitholders.
The 6 year term of RPT may be extended with the consent of all RPT investors. RPT’s50 per cent indirect interest in Roselands will be sold on termination of RPT. Followingtermination of RPT, the net proceeds after allowing for expenses and the repayment ofthe Loan will be distributed to investors in proportion to their unit holdings. RHT will beterminated as soon as practicable after RPT is terminated.
Borrowings
The proceeds of the Loan used to pay the balance owing on the issue price of RPT unitshave a leveraging effect on an investment as they increase the potential gains or losses.
The Negative Pledge Agreement contains a number of events of default which entitle theBank to require repayment of the Loan and enforce its securities in the event of default,including the following financial ratios:
• where the total financial indebtedness (as defined) exceeds 65 per cent of half of thevalue of Roselands accepted by the Bank from time to time (“LVR Ratio”); and
• where 50 per cent of the net income of RPT falls below 1.75 times the annual interestexpense (“interest cover”) (as defined, with certain adjustments).
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A number of other events of default are included, some of which are described in theRoselands Negative Pledge Agreement summary in Section 14.
On drawdown of the Loan, the LVR will be 64.75 per cent. Based on the forecasts inSection 3, interest cover is expected to be in excess of 2.0 over the forecast period.
If there is an event of default, the Bank may instruct the debenture trustee to enforce itssecurity against RPT’s units in RIT and the other assets and undertakings of RPT and sellRPT’s investment in RIT. The Bank may also call for a mortgage over RPT’s undivided halfinterest in Roselands in certain circumstances.
The Loan offered by the Bank is for a period of five and a quarter years. The Bank has noobligation to roll over the Loan at the end of the period. RPT may require refinancing andthere is no certainty that Loan funds will be obtained at all or at competitive interest rates.
It is also assumed that RPT may partly fund any expected capital expenditure in relationto Roselands with additional borrowings during the forecast period. No such additionalborrowings have been arranged currently, and any such borrowings would require theBank’s consent.
Interest Rate
Interest rates during the last year of the forecast period and beyond may vary. TheManager has not forecast the level of interest rates beyond the forecast period. However,the Manager has assumed the same interest rate during year six of the forecast period asfor the previous five years for the purpose of estimating income forecasts during year six.
Development
As discussed in Section 2, the Manager would only decide to proceed with a majorredevelopment of Roselands if the Manager believed it would increase Roselands’ marketshare of retail spending in its catchment and be in the best interests of investors. Due tothe fact that redevelopment plans have not yet been conceived no income or capitalexpenditure has been included in the forecasts.
Exit Mechanism
If Centro exercises its call option, it has the ability to do so based upon the market value ofthe RPT or RHT units at the time of exercise. The exit price achieved by investors could behigher or lower then the initial purchase price of the units.
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Taxation
The effects of taxation on investors in the Trusts can be complex and may change overtime. Investors should seek professional tax advice in relation to their own position.
The taxation treatment of the Trusts (including relevant deductions of RIT such asdepreciation and building allowance) depends on the application of current tax laws.There is a risk that the taxation status of trusts could change if taxation laws as they applyto trusts generally are changed. Investors should be aware that the general tax position oftrusts is being reviewed by the Federal Government as part of its overall review of thetaxation system.
Regulatory Risks
A number of government authorities are reviewing relevant legislation especially as itrelates to the recovery of expenses by property owners from retail tenants. Shouldchanges be made to existing legislation, or new legislation be implemented that alters thebasis on which property owners can recover expenses from retail tenants, this may havean adverse impact on the earnings of RPT and RHT.
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10. Summary of Valuer’s Report
3 July 1998
Trust Company of Australia LimitedTrust HouseNicholas Place151 Rathdowne StreetCarlton VIC 3053
Dear Sir/Madam
Re: Centro Property TrustRoselands Property Trust
Roselands Shopping CentreRoselands, New South Wales
1. Instructions
We refer to instructions received from Trust Company of Australia Limited, dated 26 June1998, to assess the market value of the freehold interest in the abovementioned propertyas at 30 June 1998. As instructed the valuation was prepared in accordance withRegulations 7.12.15 (5) of the Corporations Law.
We note that this summary has been prepared on the specific request of the Manager toprovide a brief overview of our June 30 1998 valuation report for inclusion in a prospectusdocument. It contains a precis of the factors that have been taken into consideration informulating our opinion of the value of the property. For a full description and detail of thevaluation rationale, reference should be made to the valuation report. Copies of this reportare held by the Manager of the Trust and are available for public inspection.
Our valuation has been based on the information in respect of the shopping centre as atApril 1998 and reflects general market conditions prevailing at that time. Furthermore, weconfirm we have inspected the property and conducted all relevant investigations.
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2. Valuation
We are of the opinion that the market value of the freehold interest in the property, subjectto the existing leases, as at 30 June 1998 is $176,500,000 (one hundred and seventy sixmillion, five hundred thousand dollars).
In relation to the impact of the $2,500,000 capital expenditure allowance made in ourassessment of value (as set out in our valuation report), it is our opinion that if these fundswere spent following the date of valuation, and assuming no material change in any otherissues impacting upon value, the expenditure would increase the value by $2,500,000 to$179,000,000.
Furthermore, based upon our assessment of market value at $176,500,000 we are of theopinion that acquisition costs would amount to approximately $10,150,000 (5.75 per cent)to give a total value inclusive of acquisition costs of $186,650,000.
3. Brief Description
Erected upon the site is a four level fully enclosed regional shopping centre that originallycommenced trading in 1965. The Centre is anchored by Grace Bros., Target, Coles,Franklins and Best & Less together with 151 speciality shops, 5 kiosks, 8 office suites, afree standing K mart Auto Centre and a rooftop communications site. In total the propertyis understood to have a gross lettable area of approximately 59,064.26 square metres.Furthermore, parking is provided for approximately 3,600 vehicles and the Centre iserected upon a site which is comprised within 14 separate titles and has an aggregate areaof 14.10 hectares.
4. Lease Profile
Lease profiles of the major tenants are as follows:
Grace Bros: 30 year lease from 1 July 1996 expiring 31 July 2026
Target: 20 year lease from 1 August 1996 expiring 31 July 2016
Coles: 18 year lease from 1 July 1996 expiring 30 June 2014
Franklins: 12 year 300 day lease from 5 October 1993 expiring 31 July 2006
Best and Less: 5 year lease from 1 July 1995 expiring 30 June 2000
and in respect of the specialty tenants we comment as follows:
Specialties: Some 55 per cent of specialty tenants are national traders.Lease terms are typically for 5 years with rental reviewed to eithera fixed percentage increase or CPI.
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5. General Comments
Having commenced trading in 1965, Roselands Shopping Centre has undergone redevel-opment and refurbishment in 1979, 1981, 1986, 1991 and 1993. Furthermore, the centreis located within the established residential suburb of Roselands, Municipality of Canter-bury, with its principal frontage being to King Georges Road. The primary trade area forthe centre is considered to include the suburbs of Roselands, Lakemba, Riverwood,Lugarno, Beverley Hills, Peakhurst, Padstow and Earlwood.
Specialty shop occupancy costs at Roselands Shopping Centre are at the bottom end ofthe range currently passing in regional shopping centres and when considered in relation tothe current sales turnover affords the opportunity for rental growth.
6. Market Value
Our opinion of market value has been derived via the capitalisation approach and thediscounted cash flow approach to valuation. Within the capitalisation approach we haveapplied a capitalisation rate to a market net income, making appropriate adjustments wherepassing rentals were considered out of line with market. Similarly we have based thediscounted cash flow analysis upon a pre-selected target internal rate of return over a tenyear investment horizon. The capitalisation rate and discount rate have been deduced afteranalysis of recent sales transactions of regional shopping centres in Australia, togetherwith discussions with major property investors.
In relation to the capitalisation approach the market net income has been capitalised inperpetuity at 8.50 per cent. Furthermore, we have made adjustments to the capitalisedvalue including $2,500,000 capital expenditure allowance from imminent capital works, andallowances for rental and outgoings voids arising from current vacancies.
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Our discounted cash flow analysis includes the following primary assumptions:
• Internal Rate of Return (discount rate) - 11.50 per cent
• Income rents - Annually at the mid point of each year
• Investment Horizon - 10 years
• Terminal Yield - 9.25 per cent
• Acquisition Costs - 5.75 per cent
• Disposal Costs - 1.25 per cent
• Gross annual sales in respect of Grace Bros, Franklins and Best & Less have beeninflated at Syntec’s C.P.I. forecast during each year of the investment horizon. Coles’sales have been escalated at 2.00 per cent in excess of C.P.I. and Target’s sales havebeen inflated at C.P.I. from Year 2 onwards.
• Specialty shop market rentals have been grown at 1.50 per cent in excess of C.P.I.during Year 1 of the cash flow projection, 1.25 per cent in excess of C.P.I. in Year 2 and1.00 per cent in excess of C.P.I. thereafter.
• Outflows have been included reflecting allowances for property outgoings, ongoingvacancy, the owner’s contribution to promotion, and non-recoverable expenditure.
• $2,500,000 capital expenditure allowance for imminent capital works.
As a result of these various assumptions, a net present value has been derived whichconfirms the value derived in the capitalisation approach.
7. Disclosure
Mr C Long and Mr R Hamilton of Richard Ellis (New South Wales) Pty Limited have pre-pared this summary which appears in this prospectus. Mr Long and Mr Hamilton wereinvolved only in the preparation of this summary and the valuation referred to herein andspecifically disclaim liability to any person in the event of any omission from or false ormisleading statement included in the prospectus other than in respect of the valuation andsummary.
In the case of advice provided in our valuation which is of a projected nature, we mustemphasise that specific assumptions have been made by us that appear realistic basedupon current market perceptions. It follows that any one of these assumptions, includingrental growth rates and terminal yields, used in the cash flow analysis may be provedincorrect during the course of time and no responsibility can be accepted by us in thisevent.
Yours faithfully
RICHARD ELLIS (NEW SOUTH WALES) PTY LIMITED
Charles Long AAPI Richard Hamilton AAPIRegistered Valuer No. 2321 Certified Practising ValuerDirector - Professional Services
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11. Investigating Accountant’s Report
3 July 1998
The DirectorsCPT Manager LimitedLevel 1372 Wellington RoadMULGRAVE VIC 3170
Dear Sirs
INVESTIGATING ACCOUNTANT’S REPORT
Introduction
1 We have prepared this report for inclusion in a prospectus to be dated on or about 3July 1998 (“the prospectus”) in connection with an offer of units at a cost of $2.41 perunit in the Roselands Property Trust and units at an issue price of $1.00 per unit in theRoselands Holdings Trust (“the Trusts”).
2 Expressions defined in the prospectus have the same meaning in this report.
Background
3 The Roselands Property Trust was created pursuant to a Trust Deed dated 16 June1998 for the purpose of acquiring a 50 per cent interest in the Roselands InvestmentTrust which owns 100 per cent of the Roselands Shopping Centre in Sydney, NSW(“the Property”). The other 50 per cent interest in Roselands Investment Trust will beheld by Centro Properties Group. Roselands Property Trust will be entitled to theincome from its 50 per cent indirect interest in the Property from the date of acquisi-tion. The Roselands Holdings Trust was created pursuant to a Trust Deed dated 16June 1998 for the purpose of investing in units in the Roselands Property Trust.
Scope
4 You have requested PricewaterhouseCoopers Securities Ltd to prepare an Investigat-ing Accountant’s Report covering the Manager’s Forecasts comprising prospectivefinancial information for the period from the acquisition date to 30 June 2004 as set outin Section 3 of the prospectus, incorporating:
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(a) forecast Distributions for the period ending 30 June 1999 and the five yearsending 30 June 2004; and
(b) the Proforma Balance Sheet as at the 15 September 1998.
5 PricewaterhouseCoopers Securities Ltd holds a dealer’s licence under the Corpora-tions Law and is wholly owned by PricewaterhouseCoopers.
6 The Directors of the Manager are responsible for the preparation and presentation ofthe Manager’s Forecasts, including the assumptions on which they are based.
7 Our review of the Manager’s Forecasts was conducted in accordance with AuditingStandard AUS 902 “Review of Financial Reports”. Our procedures consisted primarilyof inquiry and comparison and other such analytical review procedures we considerednecessary so as to adequately evaluate whether the assumptions seem reasonable inthe circumstances. In the case of assumptions which fall outside the scope of ourexpertise, we have relied on reports prepared by other experts, in particular thevaluation report by Richard Ellis, concerning the value of property, whose summaryreport is included in the prospectus.
8 Our review is substantially less in scope than an audit examination conducted inaccordance with Australian Auditing Standards. A review of this nature provides lessassurance than an audit and accordingly we do not express an audit opinion on theManager’s Forecasts included in the prospectus.
9 Our assessment of the compilation of the Manager’s Forecasts was conducted inaccordance with Auditing Standard AUS 804 “The Audit of Prospective FinancialInformation”. Our procedures included an audit of the financial model on which theManager’s Forecasts are compiled and an examination for consistency of applicationof the accounting policies of the Trusts.
Opinion on Manager’s Forecasts
10 The Manager’s Forecasts have been adopted by the Directors of the Manager toprovide investors with a guide to the potential future performance and distributions ofthe Trusts, based upon the achievement of certain economic, operating and tradingassumptions about future events and actions that have not yet occurred and may notnecessarily occur. There is a considerable degree of subjective judgement involved inthe preparation of forecasts. Accordingly, investors should have regard to the invest-ment risks and assumptions set out in Sections 9 and 3 respectively, of the prospec-tus.
11 The underlying assumptions are subject to significant uncertainties and contingenciesoften outside the control of the Manager and the Trustee. If events do not occur asassumed, actual results and distributions achieved by the Trust may vary significantlyfrom the Manager’s Forecasts. Accordingly, we do not express an audit opinion on theManager’s Forecasts, nor can we confirm or guarantee the achievement of theManager’s Forecasts, as future events, by their very nature, are not capable of inde-pendent substantiation.
12 Based on our review of the Manager’s Forecasts:
(a) nothing has come to our attention which causes us to believe the assumptions setout in Section 3 of the prospectus do not provide a reasonable basis for theManager’s Forecasts; and
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(b) in our opinion, the Manager’s Forecasts are properly compiled on the basis of theunderlying assumptions and presented on a basis consistent with the accountingpolicies of the Trusts, Australian Accounting Standards and other mandatoryprofessional reporting requirements (Urgent Issues Group Consensus Views) andthe requirements of the relevant Trust Deeds.
Subsequent Events
13 Other than the matters dealt with in this report and in the prospectus, to the best of ourknowledge and belief there have been no material transactions or events outside theordinary course of business of the Trusts that have come to our attention which wouldrequire comment on, or adjustment to, the information contained in this report, orwhich would cause such information to be misleading.
14 The declaration, consent and disclaimer contained in Section 14 of the prospectusshould be read in conjunction with this report.
Yours faithfully
John Grouios Peter Fekete
Representative under proper authority from Representative under proper authority fromPricewaterhouseCoopers Securities Ltd. PricewaterhouseCoopers Securities Ltd
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12. Taxation Information
3 July 1998
The DirectorsCPT Manager LimitedLevel 1372 Wellington RoadMULGRAVE VIC 3170
Dear Sirs
Roselands Holdings Trust (“RHT”)Roselands Property Trust (“RPT”)
1. We have prepared this letter to provide a broad summary of the income tax consider-ations for investors of RHT and RPT (“Unitholders”) for the purpose of inclusion in theprospectus for the above trusts. Expressions defined in the prospectus have the samemeaning in this report.
2. This letter is based on both the existing Income Tax Assessment Act 1936 (“the 1936Act”) and the Income Tax Assessment Act 1997 (“the 1997 Act”) and announcements,as at the date of this letter.
3. Our opinion is based on the facts set out in the prospectus and is limited to the incometax implications of investing in RHT and RPT only.
4. The taxation information that follows is intended as a brief guide. The informationapplies only to Unitholders who are Australian resident investors for tax purposes, andmay not apply to a Unitholder who is regarded as a trader or who holds units as part ofa business. We strongly advise investors to seek their own professional advice on thetaxation implications of their investment in the trusts.
Taxation of RHT & RPT
Taxation of Trust Income
5. Generally, the taxation of trusts is dealt with in Division 6 of Part III of the 1936 Act,unless a trust is a public trading trust as defined in Division 6C, or a corporate unittrust as defined in Division 6B. If a trust is either a public trading trust or a corporateunit trust, the trustee is subject to tax as if the trust were a company.
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6. It is understood that under the proposed structure investors can acquire units in eitherRPT or RHT. RHT will acquire units in RPT which has acquired 50 per cent of theunits in the Roselands Investment Trust (“RIT”), with a view to deriving trust distribu-tions. We understand that RIT will own and hold the Roselands Shopping Centre as along term investment for the purpose of deriving rental income. As each of RPT andRHT is investing or trading in units in a unit trust (RIT), each should be considered tobe conducting an eligible business and Division 6C should have no application. Inaddition, Division 6B will have no application.
7. Consequently, RPT and RHT should be taxed as a trust, in accordance with Division 6of Part III of the 1936 Act. As a result, the Trustee for both RHT and RPT will not beliable for Australian income tax in respect of the trust income, provided Unitholders arepresently entitled to all of the income of the relevant trust in each year of income.
Potential Law Changes
8. On 23 February 1998, the Treasurer issued a Press Release that the Government’sreview of the taxation of trusts (as announced in the 1997/98 Federal Budget) will nowproceed as part of the Government’s taxation reform program. Part of this review islikely to consider whether trusts should be taxed as companies, rather than as detailedin paragraph 7. Both the introduction and the timing of the discussed changes isspeculative. However, the Press Release reiterates that the Government reserves theright to take earlier legislative action to prevent tax minimisation or avoidance via theuse of trusts.
9. It may be that changes to the taxation of the trusts will adversely impact RHT, RPTand investors.
10. Where a revenue loss or a capital loss is incurred by RHT or RPT, the loss cannot bepassed on to the Unitholders for income tax purposes. Instead, revenue losses will becarried forward in the relevant trust and offset against the assessable income derivedin future years (that is, the tax loss will be “trapped” within each trust until the trustgenerates assessable income to offset the revenue losses). Net capital losses will becarried forward in the relevant trust and offset against future capital gains.
11. The Government has recently passed new legislation that restricts the circumstancesin which trusts may be entitled to claim an allowable deduction for prior and currentyear revenue losses and bad debt deductions. As a result of the new trust losslegislation, if revenue losses are incurred by the relevant trust, the tests for deductibil-ity of the losses under the new rules would need to be satisfied, before such lossescan be utilised.
12. The forecasts included in this prospectus do not show any tax losses arising in RHT orRPT. On this basis the trust loss rules should have no implications.
Taxation of RPT Unitholders
Taxation of Distributions
13. The law relating to the taxation of trusts is currently the subject of some uncertaintydue to recent decisions of the Federal Court (Richardson v FC of T, 97 ACT 5098 andAustralia and New Zealand Savings Bank Ltd v FC of T, 97 ACT 4461), both of whichare on appeal. The outcome of these cases could impact on the taxation results asdescribed below. The comments below are based on the generally accepted andpreferred approach to the taxation of trusts, which assumes that:
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• trust deeds can be drafted in such a manner that the trust law income equates tothe net taxable income; and
• if such drafting is not effective, or trust law income is not aligned with net taxableincome, with the result that the net taxable income exceeds trust law income, thatunitholders are taken to be presently entitled to the net taxable income in thesame proportion that they are entitled to trust law income.
14. Unitholders in RPT will be liable to pay tax on the full amount of their proportionateshare of the taxable income of RPT to which they are presently entitled in the year inwhich entitlement to income arises.
15. A Unitholder’s share of the taxable income of RPT for a year ending 30 June to whichthey are presently entitled must therefore be included as assessable income for thefinancial year ended on that date. This applies irrespective of whether distributionsfrom RPT are paid at a later time or reinvested in further units in RPT, or whetherdistributions are paid directly to a lender in satisfaction of the amounts of principal orinterest due to the lender by the Unitholder.
16. A Unitholder need not quote a Tax File Number (“TFN”) when applying for units in RPT.However, if a TFN is not quoted, or no appropriate TFN exemption information isprovided, tax is required to be deducted from any income distribution entitlement at thehighest marginal tax rate plus Medicare levy (currently 48.5 per cent).
17. A distribution from RPT to a Unitholder may include tax-free and tax-deferredcomponents as well as net capital gains which have been realised. This is discussedbelow.
18. Tax-free distributions represent distributions arising from property investment whichattract building allowances. Under existing legislation, tax-free distributions are notassessable for income tax purposes and do not affect the calculation of any capitalgain on disposal of units in RPT (but do affect the Unitholder’s calculation of a capitalloss).
19. Tax-deferred distributions are distributions arising from property investment whichattracts depreciation allowances on plant and equipment, and distributions whichinclude other tax and accounting timing differences. For capital gains tax purposes,tax deferred amounts distributed reduce the cost base of the units. Tax-deferreddistributions are not assessable when received unless and until the tax-deferredamounts received by the Unitholder exceed the cost base (indexed where theinvestment has been held for at least 12 months) of the units.
20. A net capital gain distribution by RPT should be included with a Unitholder’s othercapital gains and losses in calculating their total net capital gains. A net capital gaindistribution by RPT may be able to be offset against capital losses from otherinvestments.
Redemption or disposal of Units and Taxation of Capital Gains
21. If the Unitholder’s units are converted by any of the options available under the ExitMechanism contained in the prospectus, this conversion will be considered to be adisposal of the units in the relevant trust for Australian tax purposes. In addition, theconversion of investments in RPT units into investments in RHT units and vice-versa(as mentioned on page 12 of the prospectus) will be a disposal for capital gains taxpurposes (and an acquisition of the new units).
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22. Unitholders who dispose of their units in RPT must include any capital gain in thecalculation of their net capital gains or net capital loss for the year. Any net capitalgain must then be included in their assessable income for the financial year.
23. The capital gain on disposal will be calculated as the excess of disposal proceeds forthe units over the cost base (indexed where the investment has been held for at least12 months) of the units. A capital loss, on the other hand, is calculated as the differ-ence between the disposal proceeds for the units and the reduced cost base of theunits (ie. reduced by the tax-free and tax-deferred distributions).
24. If a capital loss is realised, that loss may be offset against other capital gains realisedin the same tax year. A net capital loss (ie. excess of capital loss over capital gain)may be carried forward until the Unitholder has net capital gains, (including net capitalgains distributed by RPT) against which the net capital loss can be offset. The abilityto carry forward capital losses will depend upon each Unitholder’s specific circum-stances.
Interest and Borrowing Cost Deductibility
25. Unitholders of RPT will fund part of the purchase price for RPT units through aninterest bearing loan (finance to be arranged by the Manager).
26. The interest expense arising on the loan taken up by Unitholders will be an allowablededuction to the extent that it is incurred in gaining or producing the assessableincome of the Unitholder.
27. For the interest expense to be deductible, Unitholders must demonstrate sufficientconnection between the expense incurred and assessable income derived. TheCommissioner of Taxation has provided income tax ruling IT2684 “Deductibility ofinterest on money borrowed to acquire units in a property unit trust” and TR 95/33“Relevance of subjective purpose, motive or intention in determining the deductibility oflosses and outgoings” on this subject. TR 95/33 broadly states that where an incomestream from an asset acquired using borrowed funds contains both assessable incomeand non-assessable amounts, the interest expense will generally be deductible in fullwhere the total assessable income exceeds the total deductions claimed againstassessable income over the term of the investment.
28. Where total deductions claimed against total assessable income of the investmentresult in an overall loss position over the life of the investment, the Commissioner mayseek to deny the excess as a deduction of the Unitholder unless the Unitholder coulddemonstrate a bona fide expectation upon entering into the investment of obtaining apositive before tax return.
29. IT 2684 deals specifically with property trusts and states that where units in propertytrusts produce no assessable income or the assessable income is less that theoutgoings it is necessary to consider all the circumstances in determining how much ofthe outgoings represent allowable deductions.
30. While the overall tax position (ie. net income or loss) of a Unitholder cannot be ascer-tained at the time of making the investment, the intention of the investor to derive nettaxable income over the term of the investment at that time may be important. Basedon statements made in the prospectus as to the forecast financial income flows, andthe proposed maximum debt funding of the investment, Unitholders would appear tobe entitled to form this intention. This however is a matter requiring an analysis ofeach Unitholder’s specific circumstances.
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31. Borrowing costs are deductible to the extent that the money is used for the purpose ofproducing assessable income. The deduction is allowed over the shorter of the periodof the loan or five years. As we understand that the investors in RPT use the borrowedfunds to subscribe for units in RPT and, based on the forecasts in the prospectus, therequisite income producing purpose should be able to be established. Further, as weunderstand that the term of the loan is five years the borrowing costs should bedeductible over five years.
Taxation of RHT Unitholders
32. RHT has been established as a separate entity to RPT for other investors who areeither unable (or do not want) to invest in RPT. Whereas an investment in RPTrequires the investor to debt finance Units in RPT, investments in RHT will be internallydebt financed by the Trustee of RHT and not the investor. Accordingly, RHT is suitablefor investors who cannot or prefer not to undertake borrowings - eg. trustee of comply-ing superannuation funds.
Proposed Limited Recourse Debt Provisions
33. If the limited recourse debt is not repaid by the investor or RHT, the proposed limitedrecourse debt provisions contained in Taxation Laws Amendment Bill (No. 4) 1998 willneed to be considered. The effect of this will be that the Bill requires that the excesscapital allowance deductions, if any, as calculated in accordance with the Bill, beincluded in the Trust’s assessable income. As RHT and RPT are not directly claiminga deduction for capital allowances (as defined in the 1997 Act), it is arguable that theseprovisions would not apply even if the debt were not to be fully repaid.
Proposed New Investment Rule of Superannuation Funds
34. In the 1998 Federal Budget it was announced that the Government has decided totighten investment restrictions on all superannuation funds. The budget paper statedthat from the introduction of the legislation all superannuation funds will be permitted tohold no more that 5 per cent of the funds’ assets (calculated on market value) incertain assets. These include:
• investments in associated parties, including trusts;
• investments involving associated parties;
• investments in certain “non-associated parties” which invest directly or indirectly inthe employer-sponsor or its associates.
35. It is our understanding that these rules were not intended to effect the type of invest-ment as discussed in this prospectus. However, as the definition of an associate forthe purpose of these tests is still uncertain, there is a risk that these restrictions couldapply in this case.
36. The new restrictions contained in the 1998 Federal Budget will limit a superannuationfund investor to a maximum of 5 per cent of the fund’s assets (calculated on marketvalue) in the type of investments described above. If the funds exceed this 5 per centlimit the trustee of the superannuation fund or the superannuation fund itself will besubject to penalties (which have not been completely specified to date).
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Taxation of Distributions
37. The tax treatment in respect of distributions made by the Trustee of RHT will be thesame as that described for Unitholders of RPT under the same heading above.
Disposal of Units and Taxation of Capital Gains
38. The tax treatment in respect of disposals of units of RHT and the taxation of capitalgains will be the same as that described for Unitholders of RPT under the sameheading above.
Non Resident investors of RPT and RHT
39. The following is a brief summary of the Australian taxation implications which apply toUnitholders of RPT and RHT who are non-residents of Australia for tax purposes.
40. Australian income tax, at rates applicable to non-residents, is required to be deductedat source from certain components of distribution entitlements not subject to Australianwithholding tax, including realised capital gains. Any interest component of distributionentitlements will be subject to interest withholding tax.
41. Non-residents are generally not liable to pay Australian capital gains tax on gainsrealised on disposal of units in RPT or RHT unless the Unitholder (and associates)has, or has an option or right to hold, 10 per cent or more of the issued units in RPT orRHT at any time during the five years prior to disposal.
42. Non-resident investors who hold units in either RPT or RHT on revenue account maynot be subject to Australia tax if they are resident in a country with which Australia hasa double tax agreement. Such investors should ascertain this themselves.
43. Non-residents need not provide a TFN.
44. A non-resident Unitholder may be entitled to a tax credit pursuant to the tax laws of theinvestor’s country of tax residence, in respect of Australian income tax withheld orpaid.
45. Non-resident investors considering subscribing for Units in RPT or RHT are advised toseek their own taxation advice before investing.
Yours faithfully
Gordon ThringRepresentative under Proper Authority fromPricewaterhouseCoopers Securities Ltd
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13. The Manager and Centro
Overview of the Manager
The Manager has extensive retail management and development expertise. With theinclusion of Roselands, the Manager will have retail assets under management ofapproximately $850 million. The Manager currently manages two regional shoppingcentres (including Roselands) and ten sub-regional centres throughout Australia.
The Manager views its management role as integral to the success of each of theproperties. Consequently, the Manager has developed a strong management structure.This structure supports the experienced centre management, leasing, development andasset management teams, which in turn work with the retailers to ensure they are providedan environment in which to prosper.
Directors of the Manager and Centro
Brian Healey (Chairman)
Mr Healey is Chairman of Portfolio Partners Limited and Biota Holdings Limited. He is alsoa director of Fosters Brewing Group Limited, Orica Limited (formerly ICI Australia Limited)and AWA Limited.
Andrew Scott (Chief Executive Officer)
Mr Scott recently joined Centro after 15 years with Coles Myer Ltd in various seniorproperty, finance and strategy positions. Immediately prior to joining Centro, he wasdirector property for Coles Myer.
Graham Goldie
Mr Goldie has a background in retail store management with over 15 years’ experience at asenior executive level for Target and Myer stores. Since 1991, Mr Goldie has operated hisown consultancy service during which time he has consulted to a wide range of diverseinterests. Mr Goldie is also a director of an information technology company, A.A.G.Holdings Pty Limited.
David Graham
Mr Graham is the principal of a corporate financial advisory firm based in Brisbane. Hehas had extensive experience in merchant banking in Australia and overseas. He is also adirector of Buderim Ginger Limited and Mincom Limited.
Laurie Wilson
Mr Wilson is a director of PGA (Logistics) Pty Ltd, Forestry Tasmania, EAN Australia Ltdand MET Tram 1 (trading as Swanston Tram).
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>>
Background to Centro
Centro was formed in February 1985 and has been listed on the ASX since September1985. Its original objectives were to invest in and manage retail and commercial propertyassets. More recently, Centro has focused on retail property assets. Currentlyapproximately 96 per cent of its total property assets are within that class.
Structure of the Centro Properties Group
The structure of the Centro Properties Group is as follows:
The two principal entities in the Centro Properties Group are a unit trust (referred to as“Centro Property Trust”) and Centro. Each Centro Stapled Security comprises one unitin Centro Property Trust “stapled” to a share in Centro. Each investor in the CentroProperties Group, therefore, owns an equal number of units and shares.
The units and shares are only able to be traded jointly as Centro Stapled Securities andcannot be traded, transferred or otherwise dealt with separately in any circumstances(including transfers effected “off market”).
Trustee and Manager
The Trustee of Centro Property Trust is Sandhurst Nominees (Victoria) Limited.
The Manager of Centro Property Trust is CPT Manager Limited, a wholly owned subsidiaryof Centro.
Dividend and Distribution Policy
Centro Stapled Security holders receive dividends from Centro as well as incomedistributions from Centro Property Trust. Distributions are paid to Centro Stapled Securityholders half yearly no later than three months after the end of the relevant period.
The trust deed of Centro Property Trust requires that the whole of the taxable income ofCentro Property Trust be distributed in each financial year (except where this wouldconstitute an event of default under the financing arrangements). The Manager intends todistribute the whole of the net accounting income of Centro Property Trust (if this is greater
Centro Properties Limited
Centro PropertiesGroup Investors
Stapled Securities
Centro Property Trust
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One Share One Unit
than the taxable income) in each financial year. The Trustee may, at the direction of theManager, also distribute capital of Centro Property Trust.
The Directors also intend to distribute all of the after tax profits of Centro. Where Centrodeclares dividends, it is intended that the payment of these coincide with Centro PropertyTrust distributions. Trust distributions and Centro dividends are aggregated and paid bycheque or direct credit into an account with a financial institution nominated by the CentroStapled Security holder.
Financial Information
The total market capitalisation of Centro Stapled Securities currently exceeds $400 million.Centro Properties Group’s financial results over the last five years are summarised asfollows:
Abridged 6 months 12 months to JuneEarnings to DecStatement 1997
$000 1997 1996 1995 1994 1993
Property rental income 21,031 42,623 34,548 29,279 24,883 20,453
Property managementincome 2,005 185 (219) (447) 150 247
Overhead expenses (2,160) (2,369) (2,396) (2,290) (2,202) (2,256)
Finance costs (7,576) (17,244) (9,380) (5,599) (7,543) (4,718)
Operating profit beforeabnormal items andincome tax 13,300 23,195 22,553 20,943 15,288 13,726
Abridged Balance 31 Dec 30 June 30 June 30 June 30 June 30 JuneSheet 1997 1997 1996 1995 1994 1993$m
Property investments 488.4 482.1 444.2 361.4 286.4 239.3
Other assets 12.2 9.4 10.7 10.4 5.3 69.6
Total assets 500.6 491.5 454.9 371.8 291.7 308.9
Borrowings 149.6 228.7 179.7 128.6 90.6 88.1
Other liabilities 20.3 19.2 18.4 20.8 14.6 84.5
Total liabilities 169.9 247.9 198.1 149.4 105.2 172.6
Net assets 330.7 243.6 256.8 222.4 186.5 136.3
Gearing(borrowings/total assets) 29.9% 46.5% 39.5% 34.6% 31.1% 28.5%
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Centro Property Portfolio
The table below sets out particulars of Centro’s portfolio after the acquisition of a 50%interest in Roselands:
Property GLA Ownership Cap Rate Discount Rate Book Value(m2) (%) (%) (%) at 30 June 98
($000)
AcquisitionRoselands 59,064 50 8.5 11.5 90,250
Existing PropertiesRetail
Mandurah (WA) 37,926 100 9.25 11.5 113,050The Glen (Vic) 48,874 50 8.00 12.0 80,200Karingal Hub (Vic) 25,771 100 9.50 12.75 84,750Westcourt Plaza (Qld) 18,372 100 11.00 13.5 36,000Warriewood Square (NSW) 18,044 100 10.25 13.0 43,500Keilor Downs Plaza (Vic) 15,244 100 10.25 13.0 39,000Cranbourne Park (Vic) 31,000 50 9.50 12.5 35,750Karratha City (WA) 21,977 100 12.00 14.0 28,500Lavington (NSW) 17,373 100 10.00 13.0 23,200Mildura Centre Plaza (Vic) 16,150 100 na na 31,700
Industrial
Mulgrave Business Park (Vic) 20,141 100 11.50 13.5 17,000
Total PortfolioIncluding Acquisition 622,900
(1) Book value of Centro’s 50% interest in RIT
na Not available
A breakdown of the Centro property portfolio by geographic location is set out below:
Centro Properties Group Strategy
The Centro Properties Group specialises in the ownership, management and developmentof retail property throughout Australia. The Directors’ aim is to maximise security holderwealth through a combination of increased income distributions and capital value.
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(1)
NSW26%
WA23%
VIC45%
QLD6%
When viewing investment opportunities, consideration is given to the following criteria:
• strong market position in the immediate catchment area;
• catchment spending and population growth potential;
• enhancing the geographic spread of the Group’s assets;
• refurbishment and redevelopment potential; and
• opportunities for improvements in value from better management.
Centro Properties Group’s strategy recognises that opportunities and efficiencies arisefrom the combination of property ownership and management businesses. As the level ofassets under management grows, the property management business will benefit from theresultant economies of scale. In turn, the growth of the property management business willdeliver productivity gains to the property ownership business and increase access toinvestment opportunities.
Most importantly, the Centro Properties Group will continue to focus on its customers, theretailers, with the object of ensuring that it provides an environment in which they canprosper.
Relationships between Centro Properties Group, Roselands Property Trust andRoselands Holdings Trust
Investors in RPT and RHT should be aware that the following relationships exist betweenthe Centro Properties Group, RPT and RHT:
• Centro Roselands Trust, a sub-trust of Centro Property Trust, owns the 50 per centinterest in RIT not owned by RPT. The basis of this relationship is governed by theterms of the Joint Venture Agreement summarised in Section 14.
• CPT Manager Limited, a wholly owned subsidiary of Centro, is the trust manager of:
• Centro Property Trust, and its wholly owned sub-trust, Centro Roselands Trust
• RIT, the owner of Roselands
• RPT and RHT.
• CPM (NSW) Pty Ltd, a subsidiary of Centro, is the manager of the Roselands ShoppingCentre under the terms of the centre management and leasing agreement summarisedin Section 14.
• Claes Pty Ltd, a subsidiary of Centro, is the development manager of the RoselandsShopping Centre under the terms of the development management and project leasingagreement summarised in Section 14.
Centro reserves the right to acquire units in RPT or RHT at any time. Centro may alsowish to underwrite (or sub-underwrite) any future rights issue by the Trusts to fundredevelopment of Roselands, as described in Section 2 of this prospectus.
Investors are also referred to the sub-underwriting arrangements between Centro and theUnderwriter described in Section 14.
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Effect of the Offer on Centro
The immediate effect of the RPT and RHT Offer, through operation of the Exit Mechanism(details of which are summarised in Section 14), is to create a contingent obligation uponCentro to pay cash or issue Centro Stapled Securities or a combination of the two, inexchange for units in RPT and RHT at or about July 2004.
If Centro, through operation of the Exit Mechanism, chooses to:
• issue Centro Stapled Securities in exchange for the units in RPT and RHT, the effect ofthe offer on Centro would be to increase the paid up capital of the Centro PropertiesGroup. The number of additional Centro Stapled Securities will be determined at thetime by reference to the value of the units in RPT and RHT (net of borrowings) and themarket value of Centro Stapled Securities;
• pay cash to RPT and RHT unitholders in exchange for the units in RPT and RHT, theeffect of the offer on Centro would be to require an outlay of funds to RPT and RHTunitholders. It is not possible to meaningfully predict the amount or the source of thefunds required for this outlay as that will depend upon the circumstances existing at thetime of the exchange.
In each case, through operation of the Exit Mechanism, Centro Properties Group mayacquire the remaining 50% of RIT and, therefore, Roselands would become a whollyowned asset of Centro Properties Group.
This prospectus does not contain more specific details regarding the effect that thecontingent obligation under the Exit Mechanism might have on Centro as it is not possibleto meaningfully forecast the circumstances which will exist at the time of exchange. Forinstance, the effect of the offer on Centro will depend upon a number of factors at the timeof exchange, including:
• Centro’s financial position
• the trading price of Centro Stapled Securities
• the value of the Roselands Shopping Centre.
In these circumstances Centro believes that it has no reasonable basis for such forecasts.
ASX Reporting
Centro Properties Group is a disclosing entity, and as such is subject to regular reportingand disclosure obligations. A summary of these obligations is set out on page 94.
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14. Additional Information
Summary of the Trust Deeds
Each Trust is governed by a trust deed dated 16 June 1998, as amended, between theManager and the Trustee and Centro Properties Limited. The material provisions of thetrust deeds, as augmented by the Corporations Law, are summarised below.
The Roselands Property Trust Deed
The Trustee
Subject to the terms of the trust deed, the Trustee may deal with the assets of the Trust asif it were the absolute owner of them. However, the Manager and the Trustee covenant thatthe Trust will be fully invested in the Roselands Investment Trust from 3 months after theoffer under this prospectus closes.
The Manager
Subject to the terms of the trust deed, the Manager has full and complete powers ofmanagement of the Trust and the Trustee is excluded from management.
Retirement and removal of the Manager and Trustee
The Manager and the Trustee may be removed in the circumstances set out in theCorporations Law.
The Manager and the Trustee may also retire on giving 3 months notice or such shorterperiod of notice as is agreed between them.
Rights and interests of Unitholders
The principal rights of Unitholders include the right to:
• attend and vote at any meeting of Unitholders; and
• participate in income and capital distributions of the Trust.
Subject to the terms of the trust deed or the terms of issue, each Unit confers an equalinterest in the Trust but not an interest in any particular part of the Trust nor any right tointerfere with the exercise of the Manager’s or Trustee’s powers.
Unitholders’ liabilities
Generally, each Unitholder’s liability will be limited to the value of their investment in theTrust.
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Manager’s and Trustee’s remuneration and fees
Each of the Manager and Trustee are entitled to be paid a fee out of the income or capitalof the Trust up to 1 percent and 0.25 percent respectively of the gross asset value of theTrust. The Manager and the Trustee may each waive or postpone payment of all or partof its fees. In addition, the Trustee and Manager are indemnified and entitled to bereimbursed out of the Trust for all expenses and liabilities which they incur in connectionwith their administration or management of the Trust or performance of their obligationsunder the trust deed.
Income distributions
Subject to the terms of issue of the Units, the Trustee must distribute the distributableincome of the Trust on a date fixed by the Manager - being no later than 90 days afterthe end of the relevant distribution period. Distribution periods will be determined bythe Manager but will not be longer than 12 months. Unitholders’ entitlements will bedetermined on the basis of their Unit holdings on the last day of the relevant distributionperiod. Subject to the terms of issue of the Units, income distribution will be satisfied bythe payment of cash.
Distribution of capital
The Manager may at any time determine that the capital or income of the Trust bedistributed to the Unitholders in proportion to the number of Units held by them. Subject tothe terms of issue of the Units, capital distributions may be satisfied by the issue of Units.
Investment policy
From 3 months after the date of closure of the RPT and RHT Offer under this prospectus,the Manager and Trustee covenant that the Trust will remain fully invested in units in theRoselands Investment Trust.
Dealing restrictions
Unitholders must not give, revoke or amend any direction or give (or have given) security inrespect of, or otherwise deal with, their Units in a manner which would prejudice thepayment, out of their entitlements to the income and capital of the Trust, to the Bank (orother relevant financier) of interest and principal under a Loan attaching to the Units.
If a Unitholder fails, in the opinion of the Manager, to comply with this condition, theUnitholder’s entitlements to the income and capital of the Trust will be forfeited and theirUnits will not rank for income and capital entitlements except to the extent and for theperiods determined by the Manager.
Further issues of units
After the Trustee has acquired 50 per cent of the units in the Roselands Investment Trustand the units which are the subject of this prospectus have been issued, the Manager mustnot issue any further units unless by way of exchange for units in RHT or by way of an offerto all existing Unitholders and only then for the purpose of funding any improvements,refurbishment or maintenance of real property investments of the RIT acquiring adjacentreal property to enhance those investments or to repay any borrowings of the RIT.
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Any further Units issued, except in the case of a rights issue, will be at a price reflectingthe net asset backing per Unit on the date of issue less liabilities and provisions which theManager considers necessary.
Repurchase or redemption of Units
Subject to the appropriate relief by the ASC being in force, there is no repurchase(buy-back) or redemption facility in relation to any Units in the Trust.
Request for exchange of Units
A Unitholder may at any time request the Manager to exchange their Units in the Trust foran equivalent value (adjusted for any Loan attaching to their Units) of Units in RHT. TheManager may, but is not obliged to, accede to such a request.
Transfer of Units
The Manager may refuse to register a transfer of Units if the transferee:
(a) does not provide evidence (to the satisfaction of the Manager) that it has been providedwith a copy of each prospectus describing the rights and obligations under any Loan;and
(b) will assume the rights and obligations of any Loan attaching to the transferred Units.
Modification of trust deed
Subject to any approval required under the Corporations Law, the Manager and the Trusteemay amend the trust deed by supplemental deed.
The Corporations Law currently prevents a trust deed from being amended without theapproval of the Unitholders unless the Trustee reasonably believes that the rights of thoseUnitholders will not be adversely affected by the amendment.
Indemnity and limitation of liability of the Trustee and Manager
The Manager and Trustee are indemnified out of the assets of the Trust and will not beliable to Unitholders for any loss or liability.
Except in the case of fraud, negligence, breach of duty or breach of trust, the Trustee willnot be liable to Unitholders to any greater extent than the extent to which it is entitled to beindemnified out of the assets of the Trust.
Special fees and costs
The Trustee and the Manager are each indemnified and entitled to be reimbursed or paidfrom the Trust fund for costs incurred as trustee of the RHT, and for fees and costs incurredwith respect to arranging, maintaining and administering any financial accommodation orLoan.
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Exit Mechanism
Refer to comments below.
The Roselands Holdings Trust Deed
Introduction
Except as set out below, the terms of the trust deed are, in all material respects, the sameas for the RPT trust deed.
Investment policy
From 3 months after the date of closure of the RPT and RHT Offer under this prospectus,the Manager and Trustee covenant that the Trust will remain fully invested in units in RPT.
Request for exchange of Units
A Unitholder may at any time request the Manager to exchange their Units in the Trust foran equivalent value of Units in RPT (together with liability under any corresponding Loans).The Manager may, but is not obliged to, accede to such a request.
Fees
Unitholders in the RHT will not be subject to any fees or other charges in excess of thefees or charges to which they would be subject had they invested directly in the RPT for solong as the RHT is fully invested in the RPT.
Exit Mechanism for each of RPT and RHT
Put and call
After 6 years (ie at 30 June 2004), the value of the Trusts’ investments will be determinedby reference to the average of a valuation performed by an appropriately qualified expertindependent valuer appointed by the Trustee and a similarly qualified valuer appointed byCentro Properties Limited. Unitholders may put all their Units (and any Loan attaching tothose Units) to Centro Properties Limited at their current unit value (adjusted for any Loanattaching to such Units) based on the average of the two valuations. A Unitholder will notbe entitled to put their Units if the Bank (or other relevant financier) is entitled to call forimmediate repayment of any Loan attributable to that Unitholder. Where any Units are put,Centro Properties Limited will have the right to call all the remaining Units (together with atransfer or assumption of any Loan attaching to such Units).
Consideration
The consideration under the put and calls will be paid, at Centro’s election, in cash orCentro Stapled Securities or any combination thereof. Any Centro Stapled Securities willbe issued at a 0.5 per cent discount to market price to compensate Unitholders fortransaction costs if they wish to dispose of such securities. The issue price will also be
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adjusted for distribution and other entitlements reflected in the market price but for whichthe new Centro Stapled Securities will not rank for participation. If the consideration underthe put and calls is satisfied in Centro Stapled Securities, application will be made for thequotation of those Centro Stapled Securities on the ASX within 3 business days after thedate of allotment or issue of those securities.
Sale of the interest in the Roselands Investment Trust
If not all the Units are put or called then RPT’s 50 per cent interest in the RoselandsInvestment Trust will be offered to the market for sale for a period of three months.
If no bid is received during that period then Centro Properties Limited has the right toacquire that 50 per cent interest at a price based on the average valuation describedabove. Centro Properties Limited may make the acquisition by either purchasing the 50 percent interest directly or by calling for the balance of the Units in RPT and RHT (so that itholds the asset indirectly through 100 per cent ownership of RPT and RHT). Theconsideration for such call will be paid in cash or Centro Stapled Securities, issued on thesame terms described above, or any combination thereof, at Centro’s election.
If Centro Properties Limited does not acquire the 50 per cent interest in the RoselandsInvestment Trust (either directly or indirectly) then that 50 per cent interest will continue tobe marketed until sold.
Distributions
Unitholders will be entitled to a share of distributable income for the distribution period inwhich a put or call is made, pro rata for the period up to the date the put or call is effected.
Transfer restrictions
Unitholders may not transfer Units during the initial put and call period or the periodbetween the end of the three month marketing period described above and the date thefinal call is effected. Unitholders will be notified of the relevant dates and transferrestrictions shortly after the put and call valuations are performed.
Attorney
Each Unitholder appoints the Manager as its attorney for the purpose of effecting the ExitMechanism including, without limitation, signing any application for Centro StapledSecurities.
Termination of the Trusts
Unless all of the Unitholders of the Trust advise that they are not in favour of termination,the RPT will be terminated and wound up as soon as practicable after the 50 per centinterest in the Roselands Investment Trust is sold and the RHT will be terminated andwound up as soon as practicable after the RPT is terminated and wound up. If either Trustcontinues because the Unitholders unanimously object to termination, such Trust will,subject to the terms of the relevant trust deed, continue until 12 years after its
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commencement at which time the Unitholders will again be consulted to determine if theTrust should continue for a further period of 12 years.
The Trust may be terminated at any time by resolution at a duly convened meeting of 75%(by value) of Unitholders on which 25% (by value) of eligible Unitholders voted.
Performance fee
A performance fee will be payable to the Manager (or one of its associates):
• by a Unitholder out of the consideration payable on exercise of the put or call; and
• by the Trustee out of the Trust on a disposal of the 50 per cent interest in the RoselandsInvestment Trust or the Roselands Shopping Centre by the Roselands Investment Trust.
as described in Section 8 of this prospectus.
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Exemption of Trusts from provisions of the Corporations Law
The ASC has made declarations and modifications under sections 1069(3) and 1084 ofthe Corporations Law and regulations 7.12.15A(2) and 7.3.02A of the CorporationsRegulations (or relief will be sought under these provisions) in respect of the trust deeds foreach of RPT and RHT which will enable those Trusts to operate in the manner described inthis prospectus. These are summarised (as far as they are relevant) as follows:
Corporations Law Provision Effect of relief
Regulations 7.12.15(5) and 7.12.15(7) The Trusts are regulated as property securitiestrusts rather than unlisted property trusts.
Sections 1069(1)(c), (d) and (e)(ii) Suspends the Manager’s obligation to repurchaseor cause the redemption of units subject tocertain conditions.
Regulation 7.12.15A Suspends the operation of the minimum liquidityrequirements for the Trusts while there is norepurchase or redemption obligation.
Regulation 7.3.02A Suspends the operation of the minimum capitalrequirements for the Manager while there is norepurchase or redemption obligation.
Section 1069(12) Removes the discretion of the Trustee and theManager to continue the operation of the Trustsbeyond the fixed term specified in the trust deedwithout unitholder approval.
Sections 216F and 1070 and Affects the register of Unitholders and allows theRegulation 7.12.15(6)(a) Manager to restrict inspection of the register in
certain circumstances.
Section 1069(1)(f) Enables the Manager not to send accounts andother statements to Unitholders who do not wantthem or cannot be located.
Regulation 7.12.15(6)(bb) Enables the Manager to issue one prospectus inrelation to both Trusts.
The declarations and exemptions are subject to various conditions that must be compliedwith for the relevant relief to continue to operate.
Managed Investments Act 1998
The Trusts are regulated under the Corporations Law. The Managed Investments Act 1998(which was passed by Federal Parliament in late June 1998 and which commencedoperation on 1 July 1998) has amended the regulatory regime for managed investmentschemes regulated by the Corporations Law. The Trusts are constituted under deedsapproved under the former regime and for which there is a two year transitional period forimplementation of changes required to comply with the new regime.
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The new regulatory regime provides for the replacement of the two party trustee/managerstructure with a single entity that will take sole responsibility and liability for all aspects ofthe operation of an investment vehicle such as the Trusts.
The regulations and policy for the new regime have not been finalised at the date of thisprospectus. The Manager intends to seek exemption from or modification of the applicationof the new requirements so that the Trusts can continue to operate with an independenttrustee and manager for as long as possible after the two year transitional period. It shouldbe noted, however, that under current proposed policy for the new regime, such exemptionor modification will not be available. If appropriate modification or exemption is not grantedthen it is proposed that the Manager will seek to continue to manage the investments of theTrusts either by itself applying to become the single responsible entity or, if another entitysuch as the Trustee assumes that role, seeking a delegation of the management functionfrom the relevant single responsible entity.
Summary of the Loan Arrangements
Facility Agreement
General
The Bank has agreed to provide a limited recourse loan facility to investors, of an amountup to $60m, to fund, among other things, part of the acquisition price of the units.
The Facility Agreement is between the Bank and Centro Syndication Finance Pty Ltd(“CSF”), a wholly owned subsidiary of the Centro Properties Group which has beenestablished to act as borrowing agent for the purposes of the facility.
The Facility Agreement provides a funding commitment to CSF for a term of 5 years and3 months, unless terminated at an earlier time. Funding will be by way of a variable rate billfacility or cash advance facility. The maximum amount of the facility is $60m, or such loweramount which complies with the loan to valuation ratio described under the heading,‘Financial undertakings’, in the summary of the Negative Pledge Agreement set out below.
Borrowing Agent
CSF acts only as agent under the Facility Agreement. It is not personally liable for any ofthe Unitholder’s payment obligations, and will not provide any additional material financialresources.
Prior to the Closing Date, CSF will act as agent for the Trustee of RPT. After that time,CSF will act as agent for all of the Unitholders in RPT from time to time.
CSF will therefore act as agent for the Trustee of RHT for any borrowings necessary tofund the acquisition of any Units held by RHT in RPT. Unitholders in RHT will not bepersonally liable for any of the borrowings under the facility.
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The Manager will be prevented from registering any transfer of a Unit in RPT unless thetransferee has provided a power of attorney in the same form as contained in thisprospectus.
RPT Unitholder’s liability
Each RPT Unitholder’s liability is determined according to its unit ratio multiplied by theoutstanding balance from time to time.
Where the only Units in RPT are ordinary Units, the unit ratio will be equal to thepercentage of all Units in RPT held by that RPT Unitholder. That ratio may be adjusted byagreement between the Trustee of RPT, the Bank and the Manager where additionalclasses of RPT Units are issued.
The outstanding balance is equal to all amounts owing under the Loan and any InterestRate Management Agreement with the Bank (including principal, interest or discount, fees,charges, expenses and certain gross-up and indemnity payments which may be required tobe made).
The amount of each RPT Unitholder’s liability may vary over time, including as a result of achange in the relative proportion of Units held by it, changes in the gearing level of theUnits over time, any changes to the unit ratio, and any increases to the facility amountwhich may be agreed in the future.
Limited recourse
The liability of any RPT Unitholder under the Facility Agreement is limited at any date to thevalue of any amounts to which it is entitled from RPT.
The Bank is not permitted to take action against a Unitholder to claim any other assets orproperty of a Unitholder (including the Units or any proceeds of sale of the Units), otherthan to claim the value of any amounts to which the Unitholder is entitled from RPT.
The Bank is not permitted to take any action against a Unitholder in relation to thetransactions contemplated by the Facility Agreement, except to the extent necessary toexercise its rights against any of the Unitholder’s entitlements under RPT or to enforceany securities granted to it.
Priority of the Bank over Unitholders
CSF, as agent for the Unitholders, acknowledges that the Bank has recourse to the assetsof RPT in priority to the rights of the Unitholders, other than their rights to retain anymoneys which have been previously paid to the Unitholders.
Other Matters
An indemnity is provided to the Bank against certain increased cost events relating to bankcapital requirements or taxes, and CSF is required to gross-up payments for any taxesrequired to be withheld from payments to the Bank. The facility may be suspended orcancelled in the case of certain events, for example, where it becomes impossible or illegalfor the Bank to maintain funding the Loan.
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Deed of Novation
The Bank, the Trustee of RPT and CSF may enter into an initial Deed of Novation on orabout 15 September 1998, whereby CSF will assume the obligations under the FacilityAgreement and Interest Rate Management Agreement as agent for the RPT Unitholders inaccordance with the arrangements set out in the Facility Agreement.
CSF is also required to enter into subsequent deeds of novation or assumption at periodicintervals in respect of transfers of units or additional allocations of units. Until the Deed ofNovation is entered into the transferor of the units will remain liable under the Loan, subjectto the limitations on recourse.
Debenture Trust Deed - First ranking security over RPT to Bank
The Trustee of RPT has entered into a Debenture Trust Deed with CBA Corporate Services(Vic) Pty Ltd, an associate of the Bank, as debenture trustee. The Bank will hold adebenture issued by the Trustee of RPT as part of security arrangements associated withthe financing.
The debenture trustee acts for the holders of debentures from time to time, and does notact for, or owe any duties to, Unitholders.
The Debenture Trust Deed contains a first ranking fixed and floating charge over all of theassets and undertaking of RPT (subject to certain minor exclusions), and the Trustee’sright of indemnity in respect of RPT. The rights of the Bank, the debenture trustee and anyother secured party under the charge to the payment of all amounts owing to it will rank inpriority to the rights of the Unitholders in all cases.
Roselands Negative Pledge Agreement
A range of undertakings, representations and events of default applicable to the FacilityAgreement are included in the Roselands Negative Pledge Agreement between CSF, theBank, the Trustee of RPT and RIT and the Manager.
Undertakings and representations
RPT and RIT are prohibited from creating security interests without the Bank’s consent,other than for certain specified exceptions.
RPT, RIT and CSF are prevented from incurring financial indebtedness (as defined) withoutthe Bank’s consent, other than for certain specified exceptions.
RPT and CSF provide a number of undertakings to the Bank, and RIT provides a numberof undertakings to RPT, which RPT is obliged to enforce for the benefit of the Bank. Theseundertakings include periodic reporting, notice and information requirements; restrictionson the change of business; an obligation to comply with laws; prohibition on reductions ofcapital by RPT and RIT; an obligation to insure the shopping centre in accordance withusual business practice; and a number of obligations specific to RPT and RIT as trusts.
A range of representations are made by RPT, RIT and the Manager.
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RIT has undertaken to agree to execute a registrable mortgage to the debenture trusteeover a half share in the shopping centre in the event that the Bank is unable to enforce thefixed and floating charge in the Debenture Trust Deed.
A range of costs, charges and indemnity payments are required to be paid to the Bank byRPT and CSF.
Restrictions on earnings distribution
RPT is prohibited from paying or declaring distributions at any time, if an event of defaultexists, or (subject to certain exceptions) if anything has occurred which would, with thegiving of notice, the passage of time or the making of any determination, result in an eventof default.
Financial undertakings
RPT and the Manager undertake to the Bank that:
• the net income interest cover ratio (as defined) for the 12 months to 30 June 1999 andevery six months thereafter for the preceeding twelve month period will not be less than1.75:1 (adjusted for the 12 months to 30 June 1999 to exclude the establishment feepaid to UBS Australia Limited); and
• the ratio of total financial indebtedness (as defined) to RPT’s share of the most recentvaluation of Roselands accepted by the Bank must not exceed 65 per cent at any time,based on valuations occurring annually, and otherwise no more than six monthly ifrequired by the Bank (“loan to valuation ratio”).
Events of default
The occurrence of an event of default allows the Bank to call for immediate repayment ofall of the outstanding amount of the Loan and amount owing under any Interest RateManagement Agreement and to instruct the debenture trustee to enforce the fixed andfloating charge in the Debenture Trust Deed, including by way of claiming any retainedearnings and exercising its power of sale over RPT’s units in RIT to recover the moneysowed to the Bank and the other parties secured under the Debenture Trust Deed.
Events of default include (but are not limited to):
• the Manager ceases to be manager of RIT or RPT;
• there is a change in control (as defined) of the Manager or CSF (other than by reasonof any change in the ownership of shares in Centro);
• the Loan to Valuation Ratio noted above is breached, and the Manager or CSF fails tosatisfy the Bank that it will be rectified within 30 business days after notice by the Bank;
• RPT ceases to hold at least 50 per cent of the units in RIT;
• CSF or RPT fails to pay any moneys to the Bank under any relevant agreement within2 business days of the due date;
• CSF, RPT, RIT or the Manager fail to perform any of its obligations under any relevantagreement, or breach in any material respect any of their representations under anyrelevant agreement (subject to certain grace periods);
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• any of a number of certain defined insolvency events occur in relation to CSF, RPT orRIT (including CSF, RIT or RPT stopping payment or ceasing to carry on business);
• any security interest is enforced, or a controller appointed, in respect of CSF, RPT orRIT;
• any present or future financial indebtedness of CSF, RPT or RIT (other than under thebanking documents with the Bank) in aggregate exceeding $2 million becomes due andpayable as a result of default or is not paid when due;
• distress is levied or judgement or an order enforced against CSF, RPT or RIT for anamount exceeding $2m;
• certain events occur in relation to RIT or RPT concerning the trusts, including removalas trustee, or the trustee ceases to be authorised under any of its trusts (subject tocertain exceptions);
• the banking documents are, or are claimed by CSF, RPT or RIT or the Manager to bewholly or, in a material respect, partly void, voidable or unenforceable;
• a change is made to their trust deed by RIT or RPT, or the memorandum and articles ofthe CSF, RPT, RIT or the Manager which affects the enforceability of the bankingdocuments;
• the capital of RPT (other than by way of distribution of the accounting profits of theTrust) or CSF is reduced; and
• an unauthorised distribution is made by RPT.
Guarantee
Following the Closing Date, RPT unconditionally guarantees to the Bank repayment of allmoneys owing under the Facility Agreement and other banking documents with the Bank.RPT also indemnifies the Bank in respect of the Facility Agreement and the other bankingdocuments.
Interest Rate Management Agreement
CSF has entered into an interest rate swap agreement with the Commonwealth Bank for afive year term. The agreement provides for fixed rate payments to be made by CSF, basedon an interest rate of 5.75% and a notional amount of $58,500,000. Floating rate paymentsbased on that notional amount are payable by the Commonwealth Bank.
CSF enters into the agreement as agent initially for RPT, and then for the Unitholders inRPT. The liabilities under the Interest Rate Management Agreement are to be assumed bythe Unitholders in RPT, under the arrangements specified in the Facility Agreement.
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The agreement is currently governed by the provisions of the 1991 ISDA Definitions. Theform of this agreement may be amended, and may include a number of additionalundertakings, representations and events of default which have not been negotiated at thedate of this prospectus. The existing provisions, and any amended provisions, may allowtermination of the interest rate swap by CSF or the Commonwealth Bank, and payment ofcompensation by either party, in a range of circumstances.
Loan to Roselands Property Trust
Under the loan agreement between UBS Australia Limited (ACN 003 059 461)(“UBS”) andthe Trustee of RPT and the Manager, UBS agrees to lend approximately $40m to theTrustee, to be applied towards subscription for units in RIT.
The loan can only be repaid:
• out of any credit balance in the account into which the proceeds of subscription paid byUnitholders is paid (disregarding that part of the unit price for which Unitholders haveassumed liability to Commonwealth Bank);
• by application for units by UBS; or
• by conversion into debt in favour of UBS on terms subordinated to the debenture trusteeand the Commonwealth Bank on terms agreed by them.
An establishment fee of around $700,000 is paid in respect of that loan. No interest ispayable.
A number of representations are made, and undertakings given by, the Trustee of RPT.
If an event of default occurs and is subsisting, UBS may with the consent of the debenturetrustee under the Debenture Trust Deed call for repayment of the loan.
Events of default include, but are not limited to:
• the Manager, RPT or other relevant party fails to make any payment to the lender whendue, or fails to comply its other obligations, or to satisfy certain conditions;
• a representation by the Manager, RPT or other relevant party is not true in a materialrespect at any relevant time;
• cross default occurs (subject to certain exceptions);
• an insolvency event or associated arrangement or event occurs in relation to theManager, RPT or other relevant company;
• there is enforcement against assets of the Manager, RPT or other relevant company;and
• there is a reduction of capital of the Manager, RPT or other relevant company.
Certain indemnities are given by the Trustee in relation to the agreement.
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Joint Venture Agreement for Roselands Shopping Centre
Parties
The parties to this agreement dated 1 July 1998 are:
• Sandhurst Nominees (Victoria) Limited, in its capacity as trustee of CRT;
• Trustee, in its capacity as trustee of RPT; and
• the Manager, in its capacity as manager of RIT.
Objectives
The main objectives of this agreement are:
• to establish a joint venture committee (“Joint Venture Committee”) (comprisingrepresentatives appointed by CRT and RPT which will be responsible for directing theManager in the asset management of RIT (including the development of RoselandsShopping Centre); and
• to set out rights of pre-emption in relation to any proposed dealings in the ownershipinterests (direct or indirect) in the Roselands Shopping Centre.
Commercial terms
Capital contributions
All units in RIT will rank equally in all respects. The intention is that, subject to transfers ofunits in accordance with the pre-emption mechanism under the agreement, CRT and RPTwill each hold 50 per cent of the units in RIT.
Borrowing
RIT may borrow funds:
• on an unsecured negative pledge basis; and
• of such amounts as both CRT and RPT determine.
Joint Venture Committee
CRT and RPT may each appoint two representatives to the Joint Venture Committee whichwill be established for the purpose of:
• receiving reports about the affairs of RIT;
• giving directions to the Trustee (in its capacity as trustee of RIT) and the Managerconcerning the activities of RIT and the management and development of theRoselands Shopping Centre;
• approving the Property Manager’s annual budget;
• addressing any potential conflicts of interest; and
• discussing strategic issues.
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Asset Management Methodology
CRT and RPT will authorise their representatives on the Joint Venture Committee to act ontheir behalf. For so long as the Centro Properties Group controls the Manager, CRT willprocure that the Manager acts in accordance with the directions of the Joint VentureCommittee (including by giving directions to the Trustee).
Meetings of Joint Venture Committee
Frequency: Meetings will be convened at least once every quarter, although amember of the Joint Venture Committee may request that a specialmeeting be convened.
Quorum: A quorum for a Joint Venture Committee meeting is one representativeof CRT and one representative of RPT.
Decisions: Questions are to be decided by a majority of votes cast by members,which majority must include one vote cast on behalf of each of CRT andRPT. Each member is entitled to one vote and the chairman does nothold a casting vote.
Obligations of the Manager
The Manager must not act, except in accordance with a direction from the Joint VentureCommittee (other than in relation to regulatory or administrative matters).
If the Joint Venture Committee resolves that the Manager must direct or request theTrustee to enter into a transaction, the Manager is required to give the direction or makethe request as soon as practicable.
The agreement outlines the mechanism by which annual budgets will be prepared by theProperty Manager and approved by the Joint Venture Committee.
Disposal of Units and changes in “effective ownership”
Units in RIT may only be disposed by a unitholder if:
• the other unitholder has given its prior consent;
• the disposal is in favour of an entity with the same “effective ownership” as theunitholder; or
• the pre-emption procedures have been followed.
If a transfer is permissible, the agreement allows a transferring unitholder alternatively to:
• request that the Manager cause the Trustee to redeem the units in RIT that would besubject to the transfer; and
• issue an equivalent number of units to the party that would have been entitled to thetransfer.
Upon the occurrence of certain “default” events, such as the winding up or receivership of aunitholder, the other unitholder is entitled to purchase the units for fair value.
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Pre-emption rights
If CRT or RPT (the “selling party”) wishes to sell all (not some only) of its units in RIT, itmust offer to sell to the other party on nominated terms no less favourable that it is willingto sell to a nominated third party. If the other party does not accept within 30 days, theselling party may sell on no less favourable terms to the third party within a further 30 days.
Termination
The document is intended to have indefinite operation and may be terminated by mutualagreement.
Roselands Shopping Centre Management andDevelopment Agreements
Roselands Management and Leasing Agreement
The parties to this agreement dated 1 July 1998 are:
• Trustee (as trustee of the RIT).
• CPM (NSW) Pty Ltd (Property Manager).
Objectives
The main objective of this document is to provide for the ongoing management of theRoselands Shopping Centre by the Property Manager.
Commercial Terms
The main commercial terms of this document are as follows:
Appointment
The Trustee appoints the Property Manager as the sole and exclusive manager of thecentre:
Duties
The Property Manager will carry out all duties in relation to:
• leasing;
• centre maintenance;
• collecting income and reporting; and
• payment of outgoings and maintenance.
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Operating expenses
The Property Manager will attend to payment of operating expenses of the centre frommonies collected by the Property Manager.
Property Manager’s remuneration
The Property Manager will receive remuneration based on 4.5 per cent of gross receipts.
Office space
The Trustee must provide the Property Manager with office space free of rent and othercosts and operating expenses.
Duration
The Property Manager shall be appointed for so long as the Property Manager (or a relatedparty of Centro) holds a 25% or more beneficial interest in the RIT.
Assignment
The Property Manager may assign its management rights to a related entity of equalfinancial resources and expertise and to any other entity provided that the prior consent(not to be unreasonably withheld by the Trustee) is obtained and the incoming party’sobligations are guaranteed by Centro.
Termination
The appointment of the Property Manager can be terminated in the followingcircumstances:
• on the failure of either party to pay any monies for a period of 14 days;
• on the failure of either party to remedy any material breach;
• if the centre is destroyed or damaged so that it cannot continue to operate and repairand construction works are not commenced within 2 years;
• if either party is found to have acted in a fraudulent or negligent manner in theperformance of its obligations;
• on insolvency of either party;
• by the Property Manager on 6 months notice if the Property Manager ceases to carryon the business of property management; and
• if the Property Manager or a related entity of the Property Manager ceases to have abeneficial interest in the Trust, the appointment of the Property Manager can beterminated by 6 months notice.
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Roselands Development Management and Project Leasing Agreement
The parties are:
• Trustee (as trustee of the RIT).
• CPM (NSW) Pty Ltd (Project Leasing Manager).
• Claes Pty Ltd (Development Manager).
Objectives
The main objectives of this document are to provide for the management of any futuredevelopment of the Roselands Shopping Centre by the Development Manager and providefor the project leasing of the centre by the Project Leasing Manager.
Commercial Terms
The main commercial terms of this document are as follows:
Appointment
The Trustee appoints the Development Manager to be the sole and exclusive developmentmanager of the centre and the Project Leasing Manager as the sole and exclusive projectleasing manager for the provision of the project leasing services for the centre.
Duties
The Development Manager will provide development management services. The ProjectLeasing Manager will provide project leasing services.
The development management services include:
• evaluating the development potential of the centre;
• putting development proposals to the Trustee for development of the centre;
• implementing development proposals once approved by the Trustee.
The project leasing services include:
• preparing and maintaining a project leasing strategy for the centre;
• putting the project leasing strategy to the Trustee;
• implementing the project leasing strategies once approved by the Trustee;
• obtaining and submitting tenancy proposals to the Trustee for approval.
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Development Fee
The Development Manager will be paid a development management fee. The developmentmanagement fee will be calculated as follows:
• 5 per cent of total development cost up to and including a total development cost of$2,000,000 plus;
• 3 per cent of total development cost exceeding $2,000,000 up to and including$10,000,000 plus;
• 2 per cent of total development cost exceeding $10,000,000.
The development management fee will be paid as follows:
• 25 per cent on development proposal approval by the Trustee;
• 25 per cent on construction commencement;
• 40 per cent during implementation of building works (by equal monthly instalments);
• 10 per cent upon practical completion;
• “wash up” on final completion.
Project Leasing Fee
The Project Leasing Manager will be paid a project leasing fee. The project leasing fee willbe calculated as follows:
• 10 per cent of annualised net rent of all leases negotiated on each project up to a totalof $1,000,000; plus
• 6 per cent of total annualised net rent of all leases negotiated on each project exceeding$1,000,000.
The project leasing fee will be paid within 30 days after the end of a month in which atenant has taken occupation or executed a lease.
Reimbursement of costs
The Development Manager and Project Leasing Manager will be entitled to recover costsincurred in performing their obligations on a direct cost basis plus staff expenses demon-strable to the Trustee as having been incurred in the performance of the duties under theagreement.
Term
The term of the agreement will be linked to the term of the Roselands Shopping CentreManagement and Leasing Agreement.
Default provisions
The normal default and insolvency provisions shall apply.
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Assignment
The Project Manager and the Project Leasing Manager have similar assignment rights tothose granted to the Manager under the Roselands Management and Leasing Agreement.
Summary of Underwriting Agreement
The Issue has been fully underwritten by Warburg Dillon Read Australia Limited.
The Manager and the Underwriter entered into the Underwriting Agreement dated 1 July1998. The Underwriter has agreed to underwrite [the full amount] of the Issue for a fee of$3,600,000. No other management fee, handling fee or brokerage will be payable by theManager.
The Manager indemnifies the Underwriter, its related bodies corporate and the directors,employees and advisers of the Underwriter and its related bodies corporate against alllosses, costs and expenses, including reasonable legal expenses, in respect of:
• false or misleading statements in or any material omissions from the prospectus, orfrom information, announcements, advertisements or publicity made by the Manager orwith the Manager’s consent or knowledge, in relation to the prospectus or the issue;
• failure by the Manager to comply with the Corporations Law or any other legal obligationin relation to the prospectus or the issue; or
• any breach by the Manager of its representations, warranties and undertakings in thisUnderwriting Agreement.
Centro has entered into an arrangement with the Underwriter under which Centro maybe required to procure subscriptions for and/or to indemnify the Underwriter against itsobligation to underwrite up to 37.5% of the Units offered for subscription. Centro willnot receive a sub-underwriting fee but may be entitled to a proportion of the incomedistributions paid on any such Units for a six month period from the Closing Date and toa proportion of any net gain realised by the Underwriter on the disposal of any such Unitsduring or after such six month period.
Any handling fee, brokerage or commission payable to members of the ASX and financialplanners in respect of Units allocated pursuant to applications lodged by them and bearingtheir stamps will be paid by the Underwriter out of its fee payable under the UnderwritingAgreement.
Disclosures of Interest
Interests of Trustee
Other than as set out in Section 14 in relation to the Trustee’s fees and in Section 13 inrelation to the relationships between Centro Property Group, RPT and RHT, at the date oflodgement of this prospectus and in the two years prior to lodgement, the Trustee did nothave any interest in the promotion of the Trusts or Centro or in property proposed to beacquired for the purpose of or by the Trusts or Centro in connection with their formation orpromotion, and no amounts, whether in cash or otherwise, have been paid or agreed to bepaid to the Trustee to induce it to act as Trustee or in any other capacity or for otherservices rendered by the Trustee in connection with the Trusts or Centro.
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Interests of Manager
Other than as set out in Section 14 in relation to the Manager’s fees and arrangements withthe Underwriter and in Section 13 in relation to the relationships between the CentroProperty Group, RPT and RHT, at the date of lodgement of this prospectus and in the twoyears prior to lodgement, the Manager did not have any interest in the promotion of theTrusts or Centro, or in property proposed to be acquired for the purpose of or by the Trustsor Centro in connection with their formation or promotion, and no amounts, whether in cashor otherwise, have been paid or agreed to be paid to the Manager to procure subscriptionsfor, or purchases of, the securities offered under this prospectus or for services rendered inconnection with the inception, formation or promotion of the Trusts or Centro or for otherservices rendered in accordance with the trust deed for the Trusts.
Interests of Centro
The issue expenses of RPT include $500,000 comprising reimbursement to Centro for theTrust’s share of expenses incurred by Centro on its behalf, including property due diligenceand trust establishment expenses and a fee payable to Centro. These costs have beenincluded in the sources and applications of funds detailed in Section 3 of this prospectus.
Interests of Directors and experts
Other than as set out below and in Section 13 of the prospectus in relation to the relation-ships between the Centro Properties Group, RPT and RHT, at the date of lodgement of thisprospectus and in the two years prior to lodgement, no director or proposed director of theTrustee, the Manager or Centro or any promoter or expert, and no firm in which suchdirector, promoter or expert is a partner, has had any interest in the promotion of the Trustsor Centro, or in property proposed to be acquired for the purpose of or by the Trusts orCentro in connection with its formation or promotion, and no amounts, whether in cash orotherwise have been paid or agreed to be paid to any director or a firm in which a directoris a partner, either to induce him to become, or to qualify him as, a director, or otherwise forservices rendered by him or by the firm in connection with the inception, formation orpromotion of the Trusts or the Company.
As at the date of this prospectus, the following directors of the Trustee, the Manager andCentro held or had the following interests in Centro Stapled Securities:
Director Centro Stapled Securities
Brian Healey 26,251
David Douglas Heydon Graham 151,000
Peter Graham Goldie 15,000
Andrew Thomas Scott 487,999
Lawrence Albert Wilson 13,774
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The directors of the Trustee, the Manager and Centro are entitled to remuneration andreimbursement of certain expenses in accordance with the articles of association of therelevant entity.
PricewaterhouseCoopers Securities Limited has prepared the Investigating Accountants’Report and the Taxation Opinion contained in Sections 11 and 12 respectively of thisprospectus. Centro has paid or agreed to pay PricewaterhouseCoopers Securities Limitedand its associates $910,000 in the last 2 years up to the date of this prospectus.
Richard Ellis (New South Wales) Pty Ltd has prepared the Valuer’s Report contained inSection 10 of this prospectus. Centro has paid or agreed to pay Richard Ellis (New SouthWales) Pty Ltd $148,950 in the last 2 years up to the date of this prospectus.
Jebb Holland Dimasi Pty Ltd has given general advice in relation to the economic assump-tions relating to the acquisition of the Roselands Shopping Centre. Centro has paid oragreed to pay Jebb Holland Dimasi Pty Ltd $65,957 in the last 2 years up to the date of thisprospectus.
Access Economics Pty Ltd have provided forecasts in relation to CPI changes. Centro haspaid or agreed to pay Access Economics Pty Ltd $1,500 in the last 2 years up to the dateof this prospectus.
Consents and disclaimers
Trust Company of Australia Limited is named in the directory as Trustee of RPT and RHT.The Trustee has had no involvement in the preparation of any part of this prospectus. TheTrustee expressly disclaims and takes no responsibility for any statement or omission fromthis prospectus. It makes no statement in the prospectus and has not authorised orcaused the issue of it.
Warburg Dillon Read Australia Limited has given and not withdrawn its consent to benamed as adviser and underwriter to the issuer in the form and context in which it is namedin this prospectus. Warburg Dillon Read Australia Limited has not authorised or caused theissue of this prospectus.
PricewaterhouseCoopers Securities Ltd has given and not withdrawn its consent to theissue of the prospectus containing the Taxation Opinion and the Investigating Accountant’sReport in the form and context in which they are included in this prospectus.PricewaterhouseCoopers Securities Ltd has not authorised or caused the issue of thisprospectus and does not make or purport to make any statement in the prospectus otherthan in the Taxation Opinion and the Investigating Accountants Report.
Centro Properties Limited and CPT Manager Limited have agreed to indemnifyPricewaterhouseCoopers Securities Ltd, PricewaterhouseCoopers and its employeesagainst claims, liabilities, losses and expenses they incur if information or documentationprovided by or on behalf of Centro Properties Limited and CPT Manager Limited is false,misleading or omits material particulars, or if relevant information or documents have notbeen supplied.
Coopers & Lybrand Securities Registration Services has given its consent to be named asregistrar in the form and context in which it is named in this prospectus. It has notauthorised or caused the issue of this prospectus and has not been involved in the prepa-ration of this prospectus.
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The Commonwealth Bank has had no involvement in the preparation of any part of thisprospectus. Accordingly, it has not authorised or caused the issue of, and expresslydisclaims and takes no responsibility for this prospectus.
Jebb Holland Dimasi Pty Ltd has given and not withdrawn its consent to be named in theform and context in which it is named in this prospectus. Jebb Holland Dimasi Pty Ltd hasnot authorised or caused the issue of this prospectus. Jebb Holland Dimasi Pty Ltd hasgiven general advice in relation to the economic assumptions relating to the acquisition ofthe Roselands Shopping Centre and has had no other involvement in the preparation ofthis prospectus generally, or the transactions contemplated by this prospectus.
Access Economics Pty Ltd has given and not withdrawn its consent to be named in theform and context in which it is named in this prospectus. Access Economics Pty Ltd hasnot authorised or caused the issue of this prospectus.
Richard Ellis (New South Wales) Pty Ltd has given and not withdrawn its consent to theissue of the prospectus containing the valuer’s report in the form and context in which it isincluded in this prospectus. Richard Ellis (New South Wales) Pty Ltd has not authorised orcaused the issue of this prospectus and does not make or purport to make any statementin the prospectus other than in the valuer’s report.
ASC modifications and exemptions
The ASC has made the following exemptions and declarations under section 1084(6) of theCorporations Law:
• modification of section 1040 to permit the Centro Properties Group to issue and allotCentro Stapled Securities more than 12 months after the date of the prospectus;
• modification of section 1021(5) to permit the prospectus to contain statements thatother than the Centro Stapled Securities that may be issued pursuant to the exerciseof the put and call option, no securities will be allotted or issued on the basis of theprospectus later than 12 months from the date of issue of the prospectus and that ifCentro Stapled Securities are issued pursuant to the exercise of the put and call option,application will be made for the quotation of those securities on the ASX within 3business days of allotment or issue of those securities;
• exemption from compliance with section 1022 in respect of the information in theprospectus about Centro Properties Group on the condition that the prospectus isissued in compliance with subsections 1022AA(1) to (7) inclusive in relation to thatinformation.
Inspection of documents
The documents and material contracts referred to in Sections 10 and 14 respectively areavailable for inspection at the offices of the Manager during the offer period.
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ASX reporting
Centro Properties Group is a disclosing entity, and as such is subject to regular reportingand disclosure obligations.
These obligations include compliance with the requirements of the Listing Rules concerningthe notification of information to the ASX. The Listing Rules require Centro PropertiesGroup to notify the ASX immediately of any information concerning Centro PropertiesGroup of which it is or becomes aware and which a reasonable person would expect tohave a material effect on the price or value of Centro Stapled Securities. There is anexception to this rule for certain confidential information.
Centro Properties Group must also provide to the ASX a half yearly report and a prelimi-nary final statement within 90 days of the end of Centro Properties Group’s half year andfull year accounting periods respectively.
Availability of documents
Documents lodged by Centro Properties Group with the ASC may be obtained from, orinspected at, an office of the ASC.
A copy of each of the documents listed below will be provided by Centro Properties Groupfree of charge, to any person who asks for them during the offer period:
(a) the financial statements of Centro Properties Group for the financial year ended 30June 1997;
(b) any other financial statements lodged with the ASC between the date of lodgement ofthe statements referred to in paragraph (a) and the date of issue of this prospectus; and
(c) any documents used to notify the ASX of information relating to Centro PropertiesGroup under the provisions of the Listing Rules between the date of lodgement of thestatements referred to in paragraph (a) and the date of issue of this prospectus.
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15. Signatures and Directors’ Statement
Signed by each of the Directors of Centro Properties Limited and CPT Manager Limited,having authorised the issue of this prospectus (or a person authorised by him in writing tosign this on his behalf):
..................................................................... ................................................................
Brian Healey Andrew Thomas ScottChairman Chief Executive Officer
..................................................................... ................................................................
Peter Graham Goldie David Douglas Heydon Graham
.....................................................................
Lawrence Albert Wilson
16. Glossary of Terms
ASC
Australian Securities Commission (and its successor bodies).
ASX
The Australian Stock Exchange Limited.
Bank or Commonwealth Bank
Commonwealth Bank of Australia Limited (ACN 123 123 124).
Centro
Centro Properties Limited.
Centro Properties Group
Centro Properties Limited, Centro Property Trust, Centro Syndication Finance Pty Ltd(ACN 083 036 953), CPT Manager Limited, CPM (NSW) Pty Ltd (ACN 054 494 201) andClaes Pty Ltd (ACN 070 607 340) and all other entities controlled by Centro PropertiesLimited and the Centro Property Trust.
Centro Stapled Securities
Securities of the Centro Properties Group traded on the ASX which comprise one unit inCentro Property Trust and one share in Centro Properties Limited.
Closing Date
15 September 1998 or such other date as the Manager determines.
CPI
Consumer Price Index.
CRT
Centro Roselands Trust.
CSF
Centro Syndication Finance Pty Ltd (ACN 083 036 953).
Debenture Trust Deed
The debenture trust deed, details of which are summarised in Section 14.
Deed of Novation
The deed of novation, details of which are summarised in Section 14.
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Development Manager
CPM (NSW) Pty Ltd
DDS
Discount department stores.
Equity subscribed
The cash portion of the application monies paid by an investor (excluding any loanportion) being $1.00 per RPT unit or RHT unit as the context requires.
EST
Eastern Standard Time.
Exit Mechanism
The “put” and “call” option mechanism, details of which are summarised in Section 14.
Facility Agreement
The facility agreement, details of which are summarised in Section 14.
GLA
Gross Lettable Area.
Interest Rate Management Agreement
The interest rate management agreement, details of which are summarised in Section14.
Internal Rate of Return (IRR)
The discount rate which, when applied to the equity subscribed and projected incomeand property value, equates to a net present value of zero.
Joint Venture Agreement
The joint venture agreement, details of which are summarised in Section 14.
Limited recourse
The Bank only has rights against the entitlement of an investor to the income and capitalof RPT. The Bank has no further recourse to RPT investors. See page 80 for furtherdetails.
LGA
Local Government Area.
Loan
The loan between CSF and the Bank. See Section 14 for further details.
97
Manager
CPT Manager Limited (ACN 054 494 307), in its capacity as manager of RHT, RPT or RIT,as the context requires.
MAT
Moving Annual Turnover.
MTA
Main Trade area.
NTA
Net tangible asset backing.
Offer(s)
RPT Offer and/or RHT Offer as the context requires.
Project Leasing Manager
Claes Pty Ltd.
Property Manager
CPM (NSW) Pty Ltd (ACN 054 494 201), a member of the Centro Properties Group.
PTA
Primary Trade Area.
Return on equity subscribed
The pre tax amount received by investors, expressed as a percentage of the equity sub-scribed by them.
RHT
Roselands Holdings Trust and, for the purpose of the ‘Summary of Loan Arrangements’ setout at pages 78 to 83 of this prospectus, includes the Trustee of the Roselands HoldingsTrust (as the context requires).
RHT Offer
The offer of units in RHT pursuant to this prospectus.
RIT
Roselands Investment Trust and, for the purpose of the ‘Summary of the Loan Arrange-ments’ set out at pages 78 to 83 of this prospectus, includes the Trustee of the RoselandsInvestment Trust (as the context requires).
98
Roselands or Roselands Shopping Centre or Property
Roselands Shopping Centre, Canterbury, NSW.
Roselands Negative Pledge Agreement
The negative pledge agreement, details of which are summarised in Section 14.
Roselands Management and Leasing Agreement
The management and leasing agreement, details of which are summarised in Section 14.
RPT
Roselands Property Trust and, for the purpose of the ‘Summary of the Loan Arrangements’set out at pages 78 to 83 of this prospectus, includes the Trustee of the Roselands Prop-erty Trust (as the context requires).
RPT Offer
The offer of units in RPT pursuant to this prospectus.
Special Resolution
A resolution passed by the holders of 75 per cent of the units which are voted on theresolution and which is voted on by holders of not less than 25 per cent of the units onissue.
STA
Secondary Trade Area.
Trust(s)
RPT and/or RHT, as the context requires.
Trustee or Trust Company of Australia
Trust Company of Australia Limited (ACN 004 027 749), in its capacity as trustee of RPT,RHT or RIT, as the context requires.
Turnover Rental
Rental payable as a percentage of sales in excess of an amount specified in the relevantlease.
Underwriter or Warburg Dillon Read
Warburg Dillon Read Australia Limited (ACN 008 582 705).
Underwriting Agreement
The underwriting agreement, details of which are summarised in Section 14.
Unit(s)
A unit in RPT and/or RHT, as the context requires.
Unitholder
A person holding units in RPT and/or RHT, as the context requires.
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100
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Please Note: If you are investing in the Roselands Property Trust, you will be required to fill out the“Limited Power of Attorney” which is attached.
Lodge your application as soon as possible. The offer opens on 15 July 1998 and closes at 5:00pm EST on15 September 1998.
ROSELANDS PROPERTY TRUSTAPPLICATION FORM
I/Weapply for
Please enter your namePlease see table on the back of this Application Form for correct forms of registrable names
BROKER/ADVISORREFERENCE STAMP ONLY
ADVISOR CODE
GIVEN NAME(S) OR COMPANY NAME SURNAME
Enter your Tax File Number(s)(or exemption category)
A B
JOINT APPLICANT #2 OR COMPANY NAME
C
D
E
JOINT APPLICANT #3 OR COMPANY NAME F ACN/ARBN
Enter your postal address Insert your telephone number
ADDRESS HG HOME
( )
ADDRESS WORK
( )
SUBURB/TOWN CONTACT NAME
Insert your CHEQUE DETAILS - Make cheque payable to “Trust Company of Australia Limited - RPT” and crossed “not negotiable”.
DRAWER BANK BRANCH AMOUNT
A$
A$
I
DRAWER BANK BRANCH AMOUNT
A$
I/We have read and understood this prospectus to which thisapplication form relates and agree to be bound by the terms of theRoselands Property Trust Trust Deed and authorise the Manager toenter my/our names in the register of unitholders. I/We acknowledgethat we are not relying on any information not contained in theprospectus. If this application is signed by an attorney, the attorneystates that he/she has no notice of revocation of the Power of Attorney.
COMMON SEAL
(Company to affix seal)
DATE
/ /
SIGNATURE(S) JOINT APPLICANT #2 JOINT APPLICANT #3
J
K REQUEST FOR DIRECT CREDIT OF DISTRIBUTIONS
Please credit all distributions on the holding as registered in the above name(s) to the following financial institutions.Note: This instruction is only applicable to banks, building societies and credit unions within Australia. If unsure of your account details pleasecheck with your financial institution.
Account Details
Name of Bank ...............................................................................................................................................................................................................
Branch (full address) ......................................................................................................................................................................................................
BSB Number (Bank/State/Branch) Account Number
Name(s) in which your account is held .........................................................................................................................................................................
Type of Account ............................................................................................................................................................................................................
THIS ACCOUNT MAY ONLY BE IN THE NAME(S) OF THE REGISTERED UNITHOLDER(S)
units in the Roselands Property Trust and lodge applicationmonies of $1.00 per unit. Minimum 10,000 units thereafterin multiples of 1,000 units
Type of Investor Correct Form Examples of Incorrect Form
TRUSTS John Smith John Smith Family Trust(Do not use the name of the trust, <Smith Family Trust A/C>use trustees’ personal names.)
DECEASED ESTATES Michael Smith Estate of the Late John Smith(Do not use the name of deceased, <Est John Smith A/C>use executors’ personal names.)
PARTNERSHIPS John Smith & Michael Smith John Smith & Son(Do not use the name of partnership, <John Smith & Son A/C>use partners’ personal names.)
CLUBS/UNINCORPORATED/INCORPORATED BODIES John Smith ABC Tennis Association(Do not use the name of clubs etc, <ABC Tennis Association A/C>use office bearers’ personal names.)
SUPERANNUATION FUNDS John Smith Pty Ltd John Smith Pty Ltd(Do not use the name of fund, <Super Fund A/C> Superannuation Funduse name of trustees of fund.)
How to Complete your Application Form and LimitedPower of Attorney for Roselands Property Trust
When completing the RPT Application Form (GREEN form),please follow the instructions below.
Please insert the NUMBER OF UNITS you wish to apply for inbox A. The application must be for a minimum of 10,000 units andthereafter in multiples of 1,000 units.
Application Monies must agree with the amount shown in box B.To calculate the application Monies, multiply the number of unitsapplied for by $1.00. The balance of $1.41 will be paid for with theproceeds of a limited recourse loan which the Manager willprocure on behalf of investors.
In BLOCK LETTERS enter the FULL NAME you wish to appearon your holding statement in box C of the Application Form andLimited Power of Attorney. This must be either your own nameor the name of a company. You should refer to the table belowfor the correct form of name which can be registered.Applications using the wrong form of name may be rejected.For example, applications in the name of a minor, trust or estate,business, firm or partnership, club, association or otherunincorporated body, are not in the name of a legal entity andcannot be accepted. However, applications made in the individualname(s) of the person(s) who is (are) the legal guardian(s),trustee(s), proprietor(s), partner(s) or office bearer(s) (asapplicable) of those entities will be accepted. In relation to theLimited Power of Attorney, natural persons must have theirsignatures witnessed.
If you are applying as JOINT APPLICANTS, complete box D ofthe Application Form and Limited Power of Attorney. You shouldrefer to the table below for instructions on the correct form ofname.
If you choose you may enter your TAX FILE NUMBER(TFN) or exemption category beside your name. Where appli-cable, please enter the TFN for each joint applicant. Althoughcollection of TFNs is authorised by taxation laws, quotation ofyour TFN is not compulsory and will not affect your application.
If applicable, please insert your ACN of ARBN.
Enter your POSTAL ADDRESS for all correspondence.All communications to you from the Roselands Property Trust unitregistry will be mailed to the address as shown in box G. For jointapplications, one address may be entered.
Please let us know your TELEPHONE NUMBER(S) andCONTACT NAME(S) in case we need to contact you in relation toyour appplication.
Payments must be made in Australian currency only. Chequesshould be made payable to: “Trust Company of AustraliaLimited - RPT”.
A
B
C
D
Cheques should be crossed “not negotiable”. Receipts forpayments will not be issued. Cheques will be deposited on thedate of receipt. Sufficient cleared funds should be held in youraccount as dishonoured cheques may result in your applicationbeing rejected. PIN (do not staple) your cheque to the ApplicationForm. Insert the cheque details in box I.
If you are applying for units in both the Roselands Property Trust(GREEN form) and the Roselands Holding Trust (GREY form)please complete separate cheques and attach to each form.
SIGN the Application Form and Limited Power of Attorney. It mustbe signed by the applicant(s) personally, or under company seal,or in either case by an attorney. If your Application Form is signedby an attorney, the power of attorney document is not required tobe lodged. Joint applicants must each sign the Application Form.
Please note that if you are applying for units in the RoselandsProperty Trust (GREEN form), you will be required to fill in the“Limited Power of Attorney” appointing CSF as your attorneyto act on your behalf in relation to the loan (see pages 39 and 40for details). The “Limited Power of Attorney” is attached to theGreen form.
If you wish your distribution net of loan interest costs to becredited directly to an account with your financial institution,ensure appropriate details are inserted in section K.
LODGEMENT OF APPLICATIONS
Send your completed Application Form and Limited Power ofAttorney with your cheques attached in the reply paid envelopeprovided or mail to:
Coopers & Lybrand Securities Registration ServicesLocked Bag A14,Sydney South NSW 1232
Coopers & Lybrand Securities Registration ServicesLevel 8, 580 George StreetSydney NSW 1171
Application Form and Limited Power of Attorney must bereceived at the Sydney office of Coopers & LybrandSecurities Registration Services before 5:00pm EST on15 September 1998.
CORRECT FORMS OF REGISTRABLE NAMES
Note that only legal entities are allowed to hold units.
Applicants must be in name(s) of natural persons, companiesor other legal entities acceptable to Roselands Property Trust.At least one full given name and surname is required for eachnatural person. The name of the beneficiary or any other non-registrable name may be included by way of an accountdesignation if completed exactly as described in the examples ofcorrect forms or registrable names below.
E
F
H
G
I
J
K
Applicant ...................................................................................................................... .....................................................................
By this Power of Attorney made on by the Applicant named above for Units in RPT (Principal ).
1. The Principal irrevocably appoints Centro Syndication Finance Pty Ltd ACN 083 036 953 as the attorney of the Principal(Attorney ).
2. The Attorney is empowered to:
(a) irrevocably bind the Principal to the obligations of a Unitholder under the Facility Agreement and other documents specifiedin Schedule 1 (each an “Approved Document”) in accordance with the arrangements stated in the Facility Agreement(including, without limitation, the share of those obligations to be assumed by a Unitholder and the limitations on recourse);
(b) execute under hand or under seal and deliver (which delivery may be conditional or unconditional) each ApprovedDocument in a form and of substance as the Attorney thinks fit;
(c) complete any blanks or dates or other missing items in an Approved Document;
(d) amend or vary an Approved Document or enter into any agreement or document which replaces an Approved Documentas the Attorney thinks fit;
(e) do any thing which in the opinion of the Attorney is necessary, expedient or incidental to or in any way relates to any of theabove;
(f) do any thing which ought to be done by the Principal under any Approved Document to which it is a party; and
(g) do any other thing (whether or not of the same kind as the above) which in the opinion of the Attorney is necessary,expedient or desirable for giving effect to the provisions of this deed poll or an Approved Document.
3. Nothing in paragraph 2 permits the Attorney to put the Principal at risk for any of the Principal’s assets or property other thanthe amounts subscribed for Units in RPT and any moneys of RPT to which the Principal is entitled.
4. The Attorney may exercise its powers under this deed poll in the name of the Principal or in the name of the Attorney and asthe act of the Principal.
5. The Attorney may exercise its powers under this deed poll even if the Attorney benefits from the exercise of that power.
6. The Principal ratifies and confirms, and undertakes to ratify and confirm all acts of the Attorney in exercise of its powers, orcontemplated powers, under this deed poll.
7. The Attorney may, at any time, appoint or remove any substitute or delegate or sub-attorney and in this deed poll, “Attorney”includes a substitute attorney appointed under this clause.
8. The exercise by the Attorney of any power under this deed poll does not connote a warranty (express or implied) on the part ofthe Attorney as to the Attorney’s authority to exercise the power, the validity of this deed poll or an assumption of personalliability by the Attorney in exercising the power.
9. The Principal indemnifies the Attorney against all claims, demands, losses, damages, costs, charges, outgoings and expenseshowever suffered or incurred by the Attorney in respect of the exercise of any of its powers under this deed poll or the ApprovedDocuments.
10. The Principal must do all things requested by the Attorney which are necessary to ensure the registration and stamping of thisdeed poll in all jurisdictions in which it must be registered and stamped to ensure its enforceability and validity for the purposesof this deed poll.
11. The Principal declares that a person who deals with the Attorney in good faith may accept a written statement signed by theAttorney to the effect that this power of attorney has not been revoked as conclusive evidence of that fact.
12. Subject to the payment direction below, the Principal irrevocably declares that it may not direct the Attorney in any manner inrelation to the matters contemplated by this deed poll.
Payment Direction
The Principal irrevocably directs Trust Company of Australia Limited acting in its capacity as Trustee of the Roselands PropertyTrust, to pay out of any moneys to which the Principal is entitled under the Roselands Property Trust (or to give any further paymentdirections to give effect to that payment), any amount which is owing or payable by the Principal to Commonwealth Bank asFinancier under the Facility Agreement specified in Schedule 1 or to any person under any interest rate management agreement, orto any other replacement or additional financier under any replacing or additional agreement for the provision of finance or interestrate management activities in relation to the Units.
Priority Acknowledgement
The Principal acknowledges that the Commonwealth Bank has recourse to the assets and income of the Roselands Property Trustat any date in priority to any of its rights at that date other than its rights to retain any moneys which have been paid to it at any timebefore that date.
Definitions
Terms not otherwise defined in this deed poll have the same meanings specified in the Glossary of the Prospectus in which thisdeed poll is contained.
Limited Power of Attorney
PLEASE INSERT DATE
/ /
106
Schedule 1 - Approved documents
Any of the following documents:
1. Facility Agreement between Commonwealth Bank and the Attorney (“Facility Agreement”);
2. Roselands Negative Pledge Agreement between Commonwealth Bank, the Attorney, the Manager, the Trustee of RPT and theTrustee of RIT;
3. Deed of Novation between Commonwealth Bank, the Trustee of RPT and the Attorney to be entered into in respect of the initialsubscription for Units, or any other deed of novation or assumption to be entered into in respect of subsequent transfers orallotments of Units;
4. Any interest rate swap agreement or other agreement in respect of interest rate management for the Facility Agreement orotherwise, entered into by the Attorney with Commonwealth Bank or any other person;
5. Any document to raise funds for the purpose of investment by the Principal in the Roselands Property Trust, or to refinancesuch investment, or to repay amounts which may be owing by the Principal under the Facility Agreement or any other docu-ment;
6. Any other deed or agreement to assign, novate or otherwise transfer any rights and liabilities of the Principal which have arisenas a consequence of the Principal’s investment in the Roselands Property Trust;
7. Any direction to pay to the Trustee of RIT or RPT;
8. Any indemnity or undertaking in respect of any of the above;
9. Any document which effects or evidences an amendment or variation to, or replacement of, an Approved Document (includingby way of any additional or changed parties); and
10. Any document, whether or not of the same kind as those listed above, which in the opinion of the Attorney is necessary orexpedient for giving effect to the provisions of the above documents, or the transactions contemplated by or ancillary to them.
Executed by the Principal as a deed poll:
SIGN HERE IF THE PRINCIPAL IS AN INDIVIDUAL
........................................................................................ ........................................................................................
Signature of Principal Signature of Witness
........................................................................................ ........................................................................................
Name (please print) Name (please print)
SIGN HERE IF THE PRINCIPAL IS A CORPORATION
The common seal of the Applicant noted abovewas affixed to this instrument:
........................................................................................ ........................................................................................
Signature of Director Signature of Director/Secretary
........................................................................................ ........................................................................................
Name (please print) Name (please print)
SIGN HERE IF THE PRINCIPAL IS A SOLE DIRECTOR/SECRETARY COMPANY
The common seal of the Applicant noted abovewas affixed to this instrument:
........................................................................................
Signature of Director and SecretaryIn my capacity as sole director and secretary of the company
........................................................................................
Name (please print)
Limited Power of Attorney
COMMON SEAL
(Company to affix seal)
COMMON SEAL
(Company to affix seal)
Lodge your application as soon as possible. The offer opens on 15 July 1998 and closes at 5:00pm EST on15 September 1998.
ROSELANDS HOLDINGS TRUSTAPPLICATION FORM
I/Weapply for
units in the Roselands Holdings Trust and lodge applicationmonies of $1.00 per unit. Minimum 10,000 units thereafterin multiples of 1,000 units
Please enter your namePlease see table on the back of this Application Form for correct forms of registrable names
BROKER/ADVISORREFERENCE STAMP ONLY
ADVISOR CODE
GIVEN NAME(S) OR COMPANY NAME SURNAME
Enter your Tax File Number(s)(or exemption category)
A B
JOINT APPLICANT #2 OR COMPANY NAME
C
D
E
JOINT APPLICANT #3 OR COMPANY NAME F ACN/ARBN
Enter your postal address Insert your telephone number
ADDRESS HG HOME
( )
ADDRESS WORK
( )
SUBURB/TOWN CONTACT NAME
Insert your CHEQUE DETAILS - Make cheque payable to “Trust Company of Australia Limited - RHT” and crossed “not negotiable”.
DRAWER BANK BRANCH AMOUNT
A$
A$
I
DRAWER BANK BRANCH AMOUNT
A$
I/We have read and understood this prospectus to which thisapplication form relates and agree to be bound by the terms of theRoselands Holdings Trust Trust Deed and authorise the Manager toenter my/our names in the register of unitholders. I/We acknowledgethat we are not relying on any information not contained in theprospectus. If this application is signed by an attorney, the attorneystates that he/she has no notice of revocation of the Power of Attorney.
COMMON SEAL
(Company to affix seal)
DATE
/ /
SIGNATURE(S) JOINT APPLICANT #2 JOINT APPLICANT #3
J
K REQUEST FOR DIRECT CREDIT OF DISTRIBUTIONS
Please credit all distributions on the holding as registered in the above name(s) to the following financial institutions.Note: This instruction is only applicable to banks, building societies and credit unions within Australia. If unsure of your account details pleasecheck with your financial institution.
Account Details
Name of Bank ...............................................................................................................................................................................................................
Branch (full address) ......................................................................................................................................................................................................
BSB Number (Bank/State/Branch) Account Number
Name(s) in which your account is held .........................................................................................................................................................................
Type of Account ............................................................................................................................................................................................................
THIS ACCOUNT MAY ONLY BE IN THE NAME(S) OF THE REGISTERED UNITHOLDER(S)
Type of Investor Correct Form Examples of Incorrect Form
TRUSTS John Smith John Smith Family Trust(Do not use the name of the trust, <Smith Family Trust A/C>use trustees’ personal names.)
DECEASED ESTATES Michael Smith Estate of the Late John Smith(Do not use the name of deceased, <Est John Smith A/C>use executors’ personal names.)
PARTNERSHIPS John Smith & Michael Smith John Smith & Son(Do not use the name of partnership, <John Smith & Son A/C>use partners’ personal names.)
CLUBS/UNINCORPORATED/INCORPORATED BODIES John Smith ABC Tennis Association(Do not use the name of clubs etc, <ABC Tennis Association A/C>use office bearers’ personal names.)
SUPERANNUATION FUNDS John Smith Pty Ltd John Smith Pty Ltd(Do not use the name of fund, <Super Fund A/C> Superannuation Funduse name of trustees of fund.)
How to Complete your Application Form for Roselands Holdings Trust
When completing the RHT Application Form (GREY form),please follow the instructions below.
Please insert the NUMBER OF UNITS you wish to apply for inbox A. The application must be for a minimum of 10,000 units andthereafter in multiples of 1,000 units.
Application Monies must agree with the amount shown in box B.To calculate the application Monies, multiply the number of unitsapplied for by $1.00.
In BLOCK LETTERS enter the FULL NAME you wish to appearon your holding statement in box C. This must be either your ownname or the name of a company. You should refer to the tablebelow for the correct form of name which can be registered.Applications using the wrong form of name may be rejected.For example, applications in the name of a minor, trust or estate,business, firm or partnership, club, association or otherunincorporated body, are not in the name of a legal entity andcannot be accepted. However, applications made in the individualname(s) of the person(s) who is (are) the legal guardian(s),trustee(s), proprietor(s), partner(s) or office bearer(s) (asapplicable) of those entities will be accepted.
If you are applying as JOINT APPLICANTS, complete box D.You should refer to the table below for instructions on the correctform of name.
If you choose you may enter your TAX FILE NUMBER(TFN) or exemption category beside your name. Whereapplicable, please enter the TFN for each joint applicant. Althoughcollection of TFNs is authorised by taxation laws, quotation ofyour TFN is not compulsory and will not affect your application.
If applicable, please insert your ACN of ARBN.
Enter your POSTAL ADDRESS for all correspondence.All communications to you from the Roselands Property Trust unitregistry will be mailed to the address as shown in box G. For jointapplications, one address may be entered.
Please let us know your TELEPHONE NUMBER(S) andCONTACT NAME(S) in case we need to contact you in relation toyour appplication.
Payments must be made in Australian currency only. Chequesshould be made payable to: “Trust Company of AustraliaLimited - RHT”.
A
B
C
D
Cheques should be crossed “not negotiable”. Receipts forpayments will not be issued. Cheques will be deposited on thedate of receipt. Sufficient cleared funds should be held in youraccount as dishonoured cheques may result in your applicationbeing rejected. PIN (do not staple) your cheque to the ApplicationForm. Insert the cheque details in box I.
If you are applying for units in both the Roselands Property Trust(GREEN form) and the Roselands Holding Trust (GREY form)please complete separate cheques and attach to each form.
SIGN the Application Form. It must be signed by the applicant(s)personally, or under company seal, or in either case by anattorney. If your Application Form is signed by an attorney, thepower of attorney document is not required to be lodged. Jointapplicant must each sign the Application Form.
If you wish your distribution to be credited directly to an accountwith your financial institution, ensure appropriate details areinserted in section K.
LODGEMENT OF APPLICATIONS
Send your completed Application Form with your chequesattached in the reply paid envelope provided or mail to:
Coopers & Lybrand Securities Registration ServicesLocked Bag A14,Sydney South NSW 1232
Coopers & Lybrand Securities Registration ServicesLevel 8, 580 George StreetSydney NSW 1171
Application Form must be received at the Sydney office ofCoopers & Lybrand Securities Registration Services before5:00pm EST on 15 September 1998.
CORRECT FORMS OF REGISTRABLE NAMES
Note that only legal entities are allowed to hold units.
Applicants must be in name(s) of natural persons, companiesor other legal entities acceptable to Roselands Property Trust.At least one full given name and surname is required for eachnatural person. The name of the beneficiary or any other non-registrable name may be included by way of an accountdesignation if completed exactly as described in the examples ofcorrect forms or registrable names below.
E
F
H
G
I
J
K
CP
G36
1 / M
itche
ll D
esig
n
