SDOT2 Product Disclosure Statement - Stockland

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58 10. Risk Factors 10.1 Introduction The performance of the Trust and Units will be influenced by a range of factors, many of which are outside the control of the Responsible Entity and its directors. The level of income and capital distributions, the value of the Property and the tax deferred component of any distributions may be reduced by any of these factors. Applicants should also be aware that an investment in the Trust represents an investment in the Trust’s equity and therefore ranks last for payment, after both secured and unsecured creditors of the Trust have been paid, in the event the Trust is terminated or wound up. In this event, Investors will only receive a return of capital following the repayment of secured and unsecured creditors. In extreme circumstances, Investors may lose all of their capital invested. The Constitution contains provisions designed to limit an Investor’s liability to the amount which remains unpaid in relation to the subscription of Units, if any. The Trust’s borrowings and the Final Instalment will increase Investors’ exposure to unforeseen events or risk factors, a summary of which are set out in this Section 10. 10.2 Risks prior to Lease Commencement Construction During the construction of the Buildings, Investors will be protected from all development risks (such as increases in construction costs, delayed or no completion). MPT will pay Stockland Development, a related entity of the Responsible Entity, a fixed price for the development of the Property, regardless of whether the costs of construction increase or completion of the development is delayed. This is detailed in Section 5.4. Stockland Development has contracted to construct 84,000 sqm of Building area for Optus. If the area of the Buildings on completion is: - equal to or greater than 84,000 sqm in accordance with the Optus Lease, the rent payable by Optus will be based on 84,000 sqm (and the price payable under the Turn-Key Development Deed for the Buildings remains fixed); - less than 84,000 sqm but more than 79,800 sqm (a 5% tolerance level), then Optus will pay rent based on the actual Building area and Stockland Development will guarantee MPT the difference between the actual rent payable by Optus and the rent based on 84,000 sqm of Building area under the Optus Lease until such time as at least 84,000 sqm of Building area has been constructed (and the price payable under the Turn-Key Development Deed for the Buildings remains fixed). Stockland Development will also guarantee the capital amount of the shortfall of net lettable area upon sale of the Trust’s Property Interest; or - less than 79,800 sqm, Optus has the right to terminate the Agreement for Lease, in which case the Trust will be wound up and Investors will receive their Application Monies back in full as described in Sections 7.7.2 and 7.7.3 If the Property is not completed by 1 July 2008 or such longer period as approved by Investors by Special Resolution or Optus terminates the Agreement for Lease, the Trust will be terminated and Investors will receive their Application Monies back. Stockland Trust will guarantee to MPT to subscribe for ordinary units in MPT or lend money to MPT which is sufficient to enable MPT to repay the Trust's loan, whilst Stockland Corporation will indemnify the Trust in respect of any shortfall in the return of the First Instalment to Investors from terminating the Trust. Details of these agreements are provided in Sections 7.7.2 and 7.7.3. Guarantee provider defaulting As a result of the guarantee and indemnity provided by Stockland Trust and Stockland Corporation which are referred to above, during the construction of the Buildings, Investors are exposed to the risk of Stockland not being able to honour its obligations under the relevant guarantees. Stockland is rated A- stable by Standard & Poor’s (refer to Section 15.10). "Widely held" test for Units The Responsible Entity will monitor the Applications to ensure that the Trust is "widely held" for the purposes of the Duties Act 1997 (NSW) (Duties Act). To be "widely held", the Trust must have more than 300 Investors and no one Investor can beneficially hold more than 19.9% of the Units on issue. A risk exists that the Underwriters may have to purchase Instalment Receipts, and therefore acquire a beneficial interest in Units, if a shortfall exists, where, upon acquisition, they individually hold more than 19.9% of the Units. Alternatively, there may be less than 300 Investors. If the Trust is not "widely held",
59 the Trust may be liable for stamp duty when it acquires its Ordinary Units in MPT upon Lease Commencement. Accordingly, if the Trust is not "widely held" by Lease Commencement, then the Trust will be terminated, and Investors will receive their Application Monies back in full. Wholesale unit trust scheme test for MPT MPT must be a "wholesale unit trust scheme" for the purposes of the Duties Act from Lease Commencement. This means that MPT must have at least three unitholders, 80% of which are "qualifying investors" for the purposes of the Duties Act. Stockland Trust and the Trust will be "qualifying investors", who in aggregate, intend to hold at least 80% of the ordinary units in MPT from Lease Commencement. Stockland Trust is negotiating with a Wholesale Investor to acquire up to 20% of the ordinary units in MPT. If these negotiations are not concluded by the date of Final Allocation, Stockland Trust intends to acquire 51% of the ordinary units in MPT and sell up to 20% of the ordinary units on issue to a Wholesale Investor by Lease Commencement. If Stockland Trust cannot sell at least 1% of the ordinary units on issue in MPT by Lease Commencement, the Trust will be terminated, and Investors will receive their Application Monies back in full. 10.3 Risks following Lease Commencement Single asset and single source income risk After Lease Commencement, the Trust's primary asset will be an indirect 49% interest in six campusstyle office buildings in Macquarie Park. Accordingly, the Trust is exposed to movements in the Macquarie Park property market, particularly upon sale of the Trust's Property Interest following a resolution by Investors to terminate the Trust, and therefore may be considered more risky than a diversified property trust. The key terms of the Optus Lease, being fixed rental income (except upon the sixth anniversary of the Optus Lease where there is a market review of the rent with a maximum rental increase of 6% and a maximum rental decease of 3% from the previous year's rent) and staggered initial lease terms of 14, 15 and 16 years, partially mitigate property market risk for the term of the Optus Lease. Section 6.2 contains further details on the Optus Lease and Section 11 contains further details on the Macquarie Park property market. Abatement of rent Optus has the right to abate rent in circumstances that were not caused by Optus to the extent that the Property is damaged in whole or in part and the Property becomes substantially unfit for occupation and use by Optus or is substantially inaccessible. Insurance may not cover all of these events. Financial strength of the tenant and the Guarantor of the Optus Lease From Lease Commencement, Optus will be the sole tenant of the Property. As the Trust derives the majority of its income from its 49% interest in MPT (which owns the Property), the distributions made to Investors after Lease Commencement will be highly dependent on the ability of Optus to continue to pay rent. If Optus is unable to meet these rental obligations, the guarantee provided by SingTel Optus Pty Limited, an entity rated A+ stable by Standard & Poor’s (refer to Section 15.10), will be called upon. If the Guarantor of the Optus Lease fails to maintain a Standard & Poor’s credit rating of not less than BBB+, then the Guarantor of the Optus Lease must provide MPT with an irrevocable and unconditional bank guarantee (without an expiry date) for an amount equal to one year’s rent, outgoings and cleaning charges. If Optus fails to make rental payments and should SingTel Optus Pty Limited be unable to meet these obligations either personally or through the use of the bank guarantee, distributions to Investors will be disrupted. Optus may assign the lease to a company that is a related entity of Optus or the Guarantor of the Optus Lease. However, SingTel Optus Pty Limited remains the Guarantor of the Optus Lease. Capital expenditure requirements and unforeseen Property expenses The Financial Forecasts include an allowance for the Trust’s 49% share of the capital expenditure funding requirements of the Property over the Forecast Period. A Capital Expenditure Facility of $3.0 million (and an Overdraft Facility of $1.0 million) has been obtained from the Financier to meet this forecast funding requirement to 30 June 2009 and any further capital expenditure incurred from 1 July 2009 to 30 June 2013. There is a risk that unforeseen additional capital expenditure requirements may require additional funding beyond the amount available under the aggregate of the Capital Expenditure Facility and Overdraft Facility. If the Trust cannot raise funds from an alternative source, the amount of distributions from the Trust to Investors may reduce.
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Optus at Macquarie Park Stockland D
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Dear Applicant On behalf of Stockla
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02 What you need to do Applicants w
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04 1. Key Investment Features (cont
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06 1. Key Investment Features (cont
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Page 14 and 15: 10 2. Details of the Offer (cont.)
Page 16 and 17: 12 2. Details of the Offer (cont.)
Page 18 and 19: 14 3. The Trust (cont.) 3.2 Bank Lo
Page 20 and 21: 16 3. The Trust (cont.) If the Orig
Page 22 and 23: 18 3. The Trust (cont.) 3.8 Taxatio
Page 24 and 25: 20 4. Instalment Receipts (cont.) I
Page 26 and 27: 22 4. Instalment Receipts (cont.) 4
Page 28 and 29: 24 5. The Property 5.1 Description
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Page 32 and 33: 28 6. The Leases and the Tenant 6.1
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Page 36 and 37: 32 7. About Stockland (cont.) 7.2 S
Page 38 and 39: 34 7. About Stockland (cont.) Tony
Page 40 and 41: 36 7. About Stockland (cont.) - Opt
Page 42 and 43: 38 8. Financial Information 8.1 Int
Page 44 and 45: 40 8. Financial Information (cont.)
Page 56 and 57: 52 9. Fees 9.1 Fees and other costs
Page 58 and 59: 54 9. Fees (cont.) 9.2 Additional e
Page 60 and 61: 56 9. Fees (cont.) 9.2.3 Interest a
Page 64 and 65: 60 10. Risk Factors (cont.) To the
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Page 68: 64 11. Valuation Report
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Page 78: 74 13. Taxation Report (cont.)
Page 82 and 83: 78 13. Taxation Report (cont.)
Page 84 and 85: 80 14. Legal Report for Superannuat
Page 86 and 87: 82 15. Additional Information (cont
Page 98 and 99: 94 16. Glossary Term A-GAAP A-IFRS
Page 100 and 101: 96 16. Glossary (cont.) Term Financ
Page 102 and 103: 98 16. Glossary (cont.) Term Specia
Page 104 and 105: 100 Guide to the Application Form (
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Page 108 and 109: Page 2 J Bank account details for T
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Stockland Funds Management Limited
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2. Privacy In order to be able to p
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SDOT2 Product Disclosure Statement - Stockland

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