Information Package for investors in Tandem PropertyUSA Fund
For over seven years, Tandem Uehling PropertyUSA, an Australian company, has been offering services allowing investors wanting to capture the positive cash flows generated by the US property market. Now in its 8th year, we have decided to add to our services offering a Fund that will invest in the same types of property assets we have successfully entertained in the past. The Fund will be for Accredited Investors with a minimum investment of US$100,000 and a hurdle rate of 10% per annum. The Fund is 10 years in duration and plans on paying out 90% of net revenue to its owners. Accessing the US property market isn’t solely for the wealthy any longer.
Tandem Uehling PropertyUSA, an Australian company, is the investment manager (Investment Manager) for the Tandem Property USA Fund-1 LLC (Fund).
The Fund is a US based, Delaware registered, Limited Liability Company (LLC) designed to pool likeminded Accredited Investor’s capital to invest in the following:
- real (direct) property assets
- SEC regulated crowdfunding in real estate
- property developments and financing
- publicly traded Real Estate Investment Trusts (REITs) and
- other property derived investments that meets our risk/reward investment criteria.
Information Package Important Notices
Offer
The Offer contained in this Information Package is an invitation for you to apply for a percentage ownership stake in the overall capital of the Fund registered as Tandem Property USA Fund - 1 LLC.
Lodgement and Listing
This Fund is a private fund allowing for appropriate control of the investors capital. We will not be listed publicly in either Australia, the U.S.A. or any other country so investors won’t get diluted.
Expiry Date
This fund is open ended and will stay open ended until it attracts 100 investors or reaches a ten-year time span from the inception date of July 1, 2018. At that point, the Fund will need to review options as to the best way to sell up and close or rollover, whichever delivers the maximum return to the investors. Tandem Uehling PropertyUSA will solicit investors opinions and interests as to whether they want to exit the Fund upon maturity at no penalty or whether they would like to rollover for another predetermined term, maintaining the same assets and status quo. Assets would either be sold or marked to market and carried by another 10-year term under the same Fund.
Note to Applicants
The information contained in this Information Package is not financial product advice and does not take into account the investment objectives, financial situation or particular needs (including financial and tax issues) of any prospective investor.
It is important that you read this Information Package carefully and in its entirety before deciding whether to invest in the Fund. In particular, in considering the information Package for the Fund, you should carefully consider these risks in light of your investment objectives, financial situation and particular needs (including financial and tax issues) and seek professional guidance from an independent and appropriately licensed or authorised professional advisor before deciding whether to invest in the Fund. Some of the key risk factors that should be considered by prospective investors are set out in the section titled Risk Factors. There may be risk factors in addition to these that should be considered in light of your specific personal circumstances.
Disclaimer and Forward-Looking Statements
No person is authorised to give any information or make any representation in connection with the Offer which is not contained in this Information Package. Any information or representation not so contained may not be relied on as having been authorised by the Fund, the Fund’s Investment Manager, or any other person in connection with the Offer. You should only rely on information in this Information Package. Except as required by law, and only to the extent so required, neither the Fund nor the Fund’s investment manager, nor any other person warrants or guarantees the future performance of the Fund, or any return on any investment made pursuant to this Information Package.
This Information Package contains forward looking statements which are statements that may be identified by words such as “may”, “could”, “believes”, “considers”, “estimates”, “expects”, “intends” and other similar words that involve risks and uncertainties. These statements are based on a number of best estimate assumptions regarding future events and actions that, at the Information Package Date, may take place.
The Fund has no intention to update or reverse the forward-looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this Information Package other than to the extent required by law.
Any forward-looking statements are subject to various risk factors that could cause the Fund’s actual results to differ materially from the results expressed or anticipated in these statements. Such forward looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Fund, the Managing Member(s) of the Fund, Investment Manager and management. The Fund does not give any assurance that the results, performance or achievements expressed or implied by forward looking statements contained in this Information Package will actually occur and investors are cautioned not to place undue reliance on these forward-looking statements.
This Information Package uses market data, industry forecasts and projections. The Fund has based some of this information on market research prepared by third parties. There is no assurance that any of the forecasts contained in the information or in reports, surveys and research of such third parties that are referred to in this Information Package will be achieved. The Fund has not independently verified this information. Estimates involve risks and uncertainties and are subject to change based on various factors, including the risk factors in section titled Risk Factors.
Statements of Past Performance
This Information Package may include information regarding past performance of the portfolios designed for its bespoke customers and other entities in connection with the Offer. Investors should be aware that past performance should not be relied upon as being indicative of future performance.
Information about the Investment Manager
This Information Package contains certain information about the Investment Manager, its Director, senior executives and business. It also contains details of its investment approach, strategy and philosophy. To the extent that the Information Package includes statements by the Investment Manager or includes statements based on any statement of, or information provided by the Investment Manager, the Investment Manager consents to each such statement being included in the Information Package in the form and context in which it is included and has not withdrawn that consent at any time prior to the lodgement of this Information Package.
Authorised Distribution
The issuer of this Information Package is Tandem Uehling PropertyUSA. Tandem Uehling PropertyUSA does not hold an Australian Financial Services Licence (AFSL) under the Corporations Act. Accordingly, offers of Property investments in the United States of America under this Information Package will be made between the Fund and Tandem Uehling PropertyUSA. As a private Fund and not a security, Tandem Uehling PropertyUSA is not obliged to have an AFSL under Australian legislation as it is performing services as a manager of a U.S. business doing business in the USA.
Accredited Investors
The Fund requires that each applicant is an Accredited Investor by the standards set out and defined by the Securities and Exchange Commission (SEC) in the U.S. (Click here for definition). If you are
reading a hard copy you can type this link into your browser: https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/investor-bulletin-accredited-investors
The purpose of verifying that all investors are Accredited Investors proves to the Company that there is a level of appropriate sophistication when it comes to investing overseas and in property. Also, we endeavour to invest in certain opportunities that require all investors of the Fund to be Accredited Investors in order for the Fund to take a position. When these opportunities arise each Fund participant will need to be verified. This verification process will be active for 90 days. After 90 days when another opportunity arises, verification will need to occur again.
Lead Manager
Tandem Uehling PropertyUSA is acting as Lead Manager on the Offer. The Lead Manager has not authorised, permitted or caused the issue or lodgement, submission, despatch or provision of this Information Package and there is no statement in this Information Package which is based on any statement made by them or by any of their affiliates, officers or employees. To the maximum extent permitted by law, the Lead Manager and their affiliates, officers, employees and advisors expressly disclaim all liabilities in respect of, and make no representations regarding, and take no responsibility for, any part of this Information Package other than references to their name and make no representation or warranty as to the currency, accuracy, reliability or completeness of this Information Package.
Electronic Information Package
This Information Package will be available in electronic form to Australian and New Zealand residents on the specific Tandem Uehling website address, www.TandemPropertyUSA.com.au. Persons who access the electronic version of this Information Package should ensure that they download and read the entire Information Package. The Offer made under this Information Package is only available to persons receiving this Information Package by invitation or in electronic form in Australia and New Zealand.
Applications for investment in the Fund may only be made on the Form attached to, or accompanying this Information Package, in its hard copy form, or in its electronic form, which must be downloaded in its entirety from www.TandemPropertyUSA.com.au, together with an electronic copy of this Information Package. By making an Application, you declare that you were given access to the Information Package, together with an Application Form. The Corporations Act prohibits any person from passing the Application Form on to another person unless it is attached to, or accompanied by, this Information Package in its paper copy form or the complete and unaltered electronic version of this Information Package.
Cooling off rights do not apply to an investment in this Fund. This means that, in most circumstances, you cannot withdraw your Application once it has been accepted.
No Offering Where Illegal
This Information Package does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. No action has been taken to register or qualify the Fund or Offer in Australia. The Fund will be registered in the state of Delaware, as a Limited Liability Company (LLC), partnership structure with a maximum of 100 investor participants. The distribution of this Information Package (including in electronic form) outside Australia and New Zealand may be restricted by law and persons coming into possession of this Information Package outside Australia and New Zealand should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of certain laws.
This Information Package does constitute an offer to sell, or solicitation of any offer to buy, real property and property related investments in the United States. The Fund to be offered under the Offer will be registered as a Limited Liability Company in the United States but not registered under the Securities Act in the United States. All Accredited Investors with capital to invest allocated for property investing can invest in the Fund.
Privacy
By completing an Application Form, you are providing personal information to the Company. The Company may collect, hold and use that personal information to process your Application, service your needs as a Fund Participant, provide facilities and services that you request and carry out appropriate administration.
If you do not provide the information requested in the Application Form, the Company may not be able to accept your Application.
Once you become a Fund Participant, the Australian Corporations Act and Australian taxation legislation as well as the United States taxation legislation require information about you (including your name, address and details of the Fund investments you hold) to be included in certain filings.
The Company may disclose your personal information for the purpose related to your investment to their agents and service providers or as otherwise authorised under the Privacy Act 1988
The Company’s agents and service providers may be located outside Australia where your personal information may not receive the same level of protection as that afforded under Australian law.
You may request access to your personal information held by or on behalf of the Company. You may be required to pay a reasonable charge to an agent in order to access your personal information. You can request access to your personal information or obtain further information about the Company’s privacy practices by contacting the Investment Manager.
The Company aims to ensure that the personal information it retains about you is accurate, complete and up-to-date. To assist with this, please contact the Company if any of the details you provided changes.
To the extent of any inconsistency between the foregoing and the Company’s privacy policy, accessible at www.TandemPropertyUSA.com.au, the foregoing will apply. In all other respects, personal information collected by the Company in connection with your Application will be handled in accordance with the privacy policy. Any queries, concerns or complaints about the Company’s privacy practices can be directed to its privacy contact officer as stipulated in the privacy policy.
Company website
Any references to documents included on the Company’s website are provided for convenience only, and none of the documents or other information on the Company’s website, or any other website referred to in the sources contained in this Information Package, are incorporated in this Information Package by reference.
Questions
If you have any questions in relation to the Offer, contact Tandem Uehling PropertyUSA on 1300 854 431 or +612 8084 0044 (for Australia) or +1 929 277 7719 (for USA) between 8:30am and 5:30pm (AEST), Monday to Friday. A paper copy of this Information Package is available free of charge to any person in Australia or New Zealand by calling Tandem Uehling PropertyUSA.
This document is important and should be read in its entirety.
How to Invest
Applications for participation in the Fund can only be made by completing and lodging the Application Form attached to or accompanying this Information Package. Be prepared to have income verification for the past two years to accompany the application.
Message from The Principal
Dear Investor,
On behalf of Tandem Uehling PropertyUSA, it is my pleasure to invite you to invest in the Tandem Property USA Fund – 1 LLC (Fund), a new investment vehicle allowing smaller investors to participate in the U.S. property market where only affluent investors could achieve above average income and cash flow.
The Fund will seek to capture long-term value by investing in Real (Direct) Property Assets and other derivative property investments including, but not limited to; SEC regulated crowdfunding for real estate; “flipping”, private mortgage notes, senior debt financing; equity positions in medium to large construction projects and public Real Estate Investment Trusts (REITs).
What will the Portfolio look like?
The Fund’s investment strategy is to develop an Investment Portfolio that combines Real Property Assets, flipping and crowdfunding investments, with the Equity Portfolio to comprise at least 20% of the Investment Portfolio.
The equity component of the Investment Portfolio will comprise of a diversified collection of Equity Assets that seek to capitalise on exposure to property derived income. The Fund will have a flexible investment mandate, across various States and cities in the U.S. and will seek to offer investors exposure to income generating methods used in the property market. Some of these methods include: public REIT investments, private mortgage notes and senior debt & equity in larger construction projects.
What is the Offer?
The Fund is seeking to raise between $10 million and $50 million under the Offer. There is no issue price as each investor becomes a percentage owner of the Fund’s total Capital Base, determined by the investor’s capital invested and the capital raised. The Fund will continue to accept capital investments at a minimum of US$100,000 per new investor, until 100 investors are achieved.
What is Real Property?
Real property, also referred to as real estate, realty or immovable property, is any property attached directly to land as well as the land itself. It is any subset of land that has been improved through legal human actions. Real properties include buildings, ponds, canals, roads and machinery, among other things.
Real property is composed of any designated portion of land and anything permanently placed on or under it. The elements on or under the land include natural resources and/or human-made structures.
Owning real properties involves different types of estates, which define the rights of the owner to use, transfer and/or sell his real properties. These estates are recognized by the law. The kind of estate depends on the terms of the lease, deed, will, land grant and/or bill of sale through which the estate was received.
What is Title III Crowd Funding for Real Estate?
In April 2012, President Barack Obama signed into law the Jumpstart Our Business Startups Act, or JOBS Act. The JOBS Act was so called because it aimed to facilitate access to capital for start-ups and small businesses, give more people the ability to participate in investment opportunities, and ultimately, create more jobs and stimulate economic growth. While other crowdfunding regulations from the JOBS Act, such as Title II and IV, were implemented more quickly, Title III is the third but most anticipated piece of crowdfunding regulation to become effective.
How does Title II differ to Title III Crowdfunding?
Title II requires that all investors are Accredited Investors thus sophisticated enough to be able to make investment decisions that may carry more risk. Title III has strict limitations since non-accredited investors can participate.
Distribution Payment Policy
The Fund’s objective is to capture and add value through both capital and income growth from an actively managed portfolio of Equity Assets and Real Property Assets.
The Fund’s aim is to pay out 90% of Net Operating Profits as distribution payments annually. The remaining 10% will be reinvested back into the Investment Portfolio. The Fund’s long-term target is to offer investors sustainable and growing income distributions that is competitive within the property market in the U.S.
Investors will have three options for receiving their income distributions. The first will be the ability to reinvest their income distributions back into the Fund, increasing their equity stake and percentage ownership of the Fund. The second will be to have their income transferred to their US bank account in US dollars. The third will be that they may choose to have their income distribution repatriated back to Australia converted into AU$.
About the Investment Manager and its Principal
Tandem Uehling PropertyUSA is a division of Tandem Uehling, a company operating in Australia since 2007 under ABN 92 392 096 922. Tandem Uehling originated as efinance.com.au in 2004 as a mortgage and financing aggregator to financial planners and accountants. In 2007, it changed its name to Tandem Uehling and developed the two divisions for financing and U.S. property investing. The financing division trades as Tandem Uehling Financing. Tandem Uehling Financing is an ASIC licenced financing brokerage firm with its own Australian Credit License 388021. Ultimately, Tandem Uehling as a whole is an ASIC regulated entity because of it financing license. Tandem Uehling PropertyUSA began researching the U.S. property market in 2008 after the Global Financial Crisis and has been providing bespoke portfolio creation, development and management since 2010. Tandem Uehling PropertyUSA is the investment manager managing the Funds in the U.S.A.
S. Gregory Uehling “Greg” was Born in July 1963. Greg lived on the upper west side of Manhattan, New York City for the first 14 years of his life. At age 10 Greg went to a private boarding school in Greenwich Connecticut where he graduated high school in 1981. Greg immediately enrolled in business school at Alfred University in upstate New York where he earned dual Bachelors of Sciences in Marketing and Finance. He graduated university in 1985. He received his first job after university at the distinguished Prudential-Bache Securities in their dividend department, providing operational support for trades in “street name” that needed to be claimed to the tune of tens of millions of misappropriated dividends owed the firm daily.
In early 1986 Greg joined Drexel Burnham Lambert in a trade support roll for mortgage back securities until late 1987 when he moved back to Prudential-Bache Securities as a licensed stock broker with his series 7, series 63 and series 3 licenses in hand.
In 1990 Greg became a Director and Executive manager of a fledgling computer network integration firm named Devise Associates where he cut his teeth on growing all sales, marketing and business development over the course of 10 years. Devise Associates started as a 13-man operation but Greg immediately trimmed headcount down to a core 4. He then built the company back up to a 34-man (and women) operation. At the turn of the millennium, the core 4 directors decided it was time to sell in 2000.
In 2000, after the sale of Devise, Greg joined his newlywed wife Elizabeth, to Sydney Australia where her Greenwich CT based management consulting firm had a project with the then 5th largest bank being St. George Bank (now owned by the 2nd largest bank, Westpac). During this year down under, Greg and ‘Beth’ were building their new home on a plot of land situated on a lovely cul-de-sac in Redding, Connecticut which is in sought-after Fairfield County. In November, they closed on this property to begin their foray into homeownership and the start of Greg’s itch for property.
2001 wasn’t a kind year for the Uehlings when Enron tarnished the management consulting industry indirectly, from their fraudulent practices, preventing Beth’s firm from gaining traction with new projects. Greg’s new employer was destroyed in the 9/11 attacks in the financial district of lower Manhattan.
Beth’s consulting firm found refuge back in Sydney, Australia in 2002 with the largest insurance company in Australia, Insurance Australia Group (IAG). They were hired based on their stellar performance in 2000 with St. George Bank. When the project was over at the beginning of 2003, Greg and Beth decided to seek Permanent Residency (PR) in Australia to capitalize on Beth’s pristine record of consulting senior executives within the banking and insurance industries. Her relationships and database of ‘who’s who’ contacts became the foundation of their new existence in Australia. Once they decided to stay in Australia for an undetermined amount of time, they rented their home in Redding CT and made Australia home. Their Redding property has been rented seamlessly and without vacancy for over 17 years. Because this property essentially became a rental property, this was the first U.S. property asset Greg successfully began managing from Australia.
In 2004 Permanent Residency was granted and in 2006 dual citizenship was secured. While Beth is continuing her work as an executive in the insurance field, Greg discovered his true expertise in professional services of small to medium sized businesses. He first worked with an American Radiologist based in Sydney, providing radiological diagnostics of MRI, CAT scans and ultrasounds back to the U.S.A. during their off hours when it was normal business hours in Sydney. This professional service was called Nighthawk Radiology and the company was renamed Diagna Radiology. This proved to Greg that computer networking wasn’t his final career but creating professional services for companies with high barriers to entry was where he would prosper. Greg sold his Diagna stake in 2004 and immediately became the CEO of a mortgage broking aggregator which wanted to develop professional services to accountants, financial advisers and financial planners, where they would resell ‘financing’ to their clients. This company was called eFinance.com.au. In 2009 Greg bought out the directors and the loan book while rebranding to the new name Tandem Uehling. It was at this time Greg added property consulting services where Australian property investors could gain access to newly renovated, property managed real estate in individual company vehicles that he facilitates with his legal teams. Bank accounts, Limited Liability Companies, trading accounts to buy spot U.S. dollar, access to a national network of Affiliates to purchase and manage properties, accounting and legal services are a few of the services he offers for a fee. Now in his 13th year financing in Australia and his 10th year in U.S. property consulting, Greg travels between the U.S. and Australia gathering Aussie investment capital to invest in property projects in selected markets around the USA.
As Greg continues offering his services for bespoke portfolio development and management to wealthy investors with a sizable investment capital base, it has become increasingly difficult to implement certain standard elements without having the investor travel to the U.S. This, along with his exemplary performance over the past 8 years, has him realising that now is the time to launch a Property Fund. This Fund allows likeminded property investors to pool their resources together to access greater quality properties and property developments with more diversification and less risk. This investment style was once only available for the very wealthy which is why Greg is offering this new opportunity for everyday Australians to benefit from the growth and cash flows offered from the U.S. property market.
Performance
The sole measure for which the Fund will base itself relates to the numerous bespoke portfolios managed over the past nine years. Since each portfolio had its own risk profile and individual objectives determining the returns they seek, we can provide what we consider to be the most “normal” data based on actual returns.
Example #1: One portfolio comprising of a couple of properties purchased in Cleveland OH as “renovated buy and hold” and one Totally re-developed from scratch in Pittsburgh PA. This asset was simply a triple brick structure as the skeleton for which we rebuilt the insides to become a 4-bedroom 2 bathroom with the 3rd floor left unfinished for a later date. This became a rental property as well. This portfolio originated in 2011 and today, 9 years later, the assets are generating a blended gross cash flow rate of 13.4% and net income of 9.83% per annum. The growth on the assets as marked to market 2019, shows a blended growth rate of 8.75% per annum. So, if this portfolio was to ‘sell up’ today it would show an Internal Rate of Return (IRR) of 18.58%, taking both capital appreciation and net income into account.
Example #2: A client with a SMSF required assets that were extremely conservative so we were limited to large quality properties in very good neighbourhoods where the prices would be greater. We chose the northern metroplex of Dallas TX to find our properties. This portfolio began in 2015 and because the SMSF auditor needed actual data on the current values, we were able to show in a very short period of time that the capital appreciation was 22% over the past 2 years and the cashflow is 8% per annum. This blended total return is 20% per annum for this investor waiting for retirement and almost half is in cashflow.
The Fine Print
Fund Capital Base
The Fund will be open to the number of investors it can accept, up to a maximum of 100 investors. With a minimum investment of US$100,000 per investor the Fund’s minimum Capital Base will be $10,000,000 when fully Capitalised. There will be no maximum amount unless any one investor becomes more than 20% of the overall Capital Base. There may be times when the Fund has investors more than 20% ownership, mostly in the beginning of funding. However, the fund manager will attempt to do its best to limit any one investor to own more than 20% of the Fund.
General Structure
Each Fund participant will invest a minimum of US$100,000 of Capital with no ceiling to the amount they can invest as long as the total investment capital doesn’t surpass 20% of the overall Fund Capital Base in year three. Each investor’s capital will increase the Fund size and the percentage share of each investors overall percentage will be commensurate with their capital amount divided by the overall fund Capital value. Updates will be available upon logging into the Fund’s website where each investor will have their private view of their investment particulars. Until the site is complete, quarterly statements will be distributed.
If Investor A invests $250,000, Investor B invests $300,000 and Investor C invests $400,000, the Fund will comprise of $950,000 of Capital where Investor A owns 26.3%, Investor B owns 31.6% and Investor C owns 42.1% *.
When Investor D participates with $100,000 and Investor E participates with $175,000 the new fund Capital Base will be $1,225,000 and the new percentages will be Investor A at 20.4%, Investor B at 24.5%, Investor C at 32.6%, Investor D at 8.2% and Investor E at 14.3% *
The Capital Base is different to the Net Asset Value (NAV) since the Fund will be accumulating income from rental, profits or losses from the sales of assets and expenses and asset values. The NAV will fluctuate monthly and will be presented to all Fund Participants on a quarterly basis via the secure login on the Fund’s website. Each individual investor’s account will be found at www.TandemPropertyUSA.com.au once competed.
Expected Returns
The Fund endeavours to achieve at least a 10% rate of return per annum. This rate will comprise of rental income from buy and hold assets; capital appreciation from assets marked to market or sold; interest from crowd funding; private mortgage notes; interest from senior debt investments capital appreciation from equity investments and dividends and capital appreciation from listed REITs.
* This is for informational purposes and the Fund Manager will do its best to prevent any one investor to own more than 20% of the overall Capital Base
Vesting Period
Investors will be 100% vested in any and all assets once funds are received and entered into the Fund. New investors will derive income on existing assets once vested on a twelve (12) month vesting period. The investor will become 1/12th vested in the existing assets in the month they entered the Fund. In month two they will become 2/12th (1/6th) vested. Month 3, 3/12th (1/4th) vested and so forth.
Management Fees and Incentive Bonus
The Investment Manager will charge an annual fee of 2% of Assets Under Management (AUM). This fee will be deducted each quarter, at the end of the quarter, at a rate of 0.50%. This fee will become an expenditure associated with managing the overall Fund.
The Fund will maintain a running total of asset values, income generated in its bank account and any capital appreciation occurring from deals or sales of real property, to determine what the rate of return is on a monthly basis. If and when the Fund exceeds the equivalent of 10% annual return (hurdle rate) or 2.5% in any quarter, a premium payment will be provided to the Investment Manager at a scaled rate of 20% for the return over 2.5% (10%pa) and up to 3.75% (15%pa) (return band). If the return is over 3.75% (15%pa) up to 6.25% (25%pa) then a scaled rate of 40% will be paid to the Investment Manager for that return band. If the return is over 6.25% (25%pa) then the Investment Manager will be paid a scaled 60% of this return band representing everything above a 25% annual rate of return.
Example:
If a $1,000,000 portfolio returned 15% pa the fee structure would be: first 10% to investors = $100,000, the next 5% = $50,000 would be split between Investment Manager 20% = $10,000 and Investors 80% = $40,000. In total, the investors would capture $140,000 of the $150,000 or 14% and the Investment Manager would capture a Bonus of $10,000 or 1%.
If the same portfolio as above returned 22% pa the investors breakdown would be: first 10% to investors = $100,000, next band to 15% = 80% of $50,000 = $40,000 and then the next band to 25% = 60% of the $70,000 = $42,000. The total is $182,000 or 18.2% net of fees.
Early Withdrawal Penalty
This Fund is a property fund investing in real property and real property derivatives. The Fund is not liquid and is not designed to return capital easily while investing. The Fund also prefers to be as fully invested as possible to maximise returns thus there will be little available cash for distributions other than normal annual cash distributions. Because any withdrawals will hurt the rest of the investors who are keeping their investments in the Fund, a penalty rate and non-accrual period will be applied for any capital requested for early withdrawal prior to the 5-year Fund term.
If an early withdrawal is imminent then a notice period will be required in order to receive early withdrawal of funds. A minimum of three (3) months’ notice is required and the investor will not accrue income from their share of the Fund during these months. The penalty rate is equal to the inverse of the remaining months, shown as a percentage, out of a total of twelve (12) months. If a three (3) month notice is given then the penalty rate will be 9% of the capital requested and three months of non-accrual income. If the notice period is six (6) months then the penalty is 6%. If twelve (12) months’ notice is given then the penalty rate is zero percent (0%) but the investor will not accrue income during the notice period which is 12 months in this case. The penalty rate is on top of the loss of accrued income.
Risk Factors
Introduction
Applicants should consider the risk factors described below, together with the information contained throughout this Information Package and should consult their professional advisor before deciding whether or not to apply for such an investment.
There are factors, both of a general nature and specific to the Fund, which may have a material adverse effect on the future operating and financial performance of the Fund and the net asset value of the Fund. Some of the risks may be mitigated by the Fund however, many of these factors are outside the control of the Directors and the Investment Manager. The following is not intended to be an exhaustive list of the risk factors to which the Fund is exposed currently or in the future.
Risks Specific to Tandem Property USA Fund – 1 LLC
No operating or performance history to the Fund – Whilst the Directors of the Fund have significant experience in managing securities, financial and related advisory industries, the Fund is a new entity with little financial, operating or performance history and only has a 1 year track record which can be used by investors to make an assessment of the ability of the Fund and/or Investment Manger to achieve the objectives set out in this Information Package.
Investment Manager – The success and profitability of the Fund depends heavily on the ability of the Investment Manager to construct an Investment Portfolio that increases in value over time and delivers income and long term growth. The Investment Manager may not effectively manage the Investment Portfolio or may advise the Fund in a manner that does not consistently meet the Investment Objectives over time. The past performance of the portfolios managed by the Investment Management Agreement has an initial term of 10 years. Even if the Fund does not perform, it may be difficult to remove the Investment Manager.
If the Investment Manager, or a key employee of the Investment Manager, ceases to manage the Investment Portfolio and/or the Investment Management Agreement is terminated, the Fund will need to identify and engage a suitably qualified and experienced investment manager to ensure that the Investment Portfolio continues to meet its Investment Objectives and the Investment Portfolio.
While the Investment Manager will seek to mitigate the risks that may adversely affect its investment performance or its investment decisions, through implementation of internal risk management policies and procedures designed to monitor and address these risks, there can be no guarantee the Investment Manager will achieve any particular investment return or yield within the Investment Portfolio.
In relation to the Direct Real Property Assets, the Fund will rely upon, among other things, the advice and recommendations of a diverse group of property developers and managers (Affiliates) local to the respective markets in the U.S.A. where the assets are purchased. It is possible that these Affiliates are unable to identify suitable new acquisitions or that the Fund is unable to secure Direct Real Property Assets acquisitions.
It is also possible that due diligence undertaken by Affiliates in connection with new acquisitions does not reveal issues that could later have a materially adverse impact on the value of the Investment Portfolio. For example, if due diligence has failed to reveal latent defects in the construction of a Property or necessary capital expenditure, the additional requirements could reduce the value of or future returns on that Property.
Affiliates may be unable to identify suitable investment opportunities, thereby restricting the Fund’s ability to add properties to its existing Portfolio. This may adversely impact returns to Fund investors.
Direct Real Property Investment Risk – The Value of the Investment Portfolio may be adversely affected by a number of factors outside the control of the Fund, including supply and demand for the Direct Real Property Assets, general property market conditions, the availability of credit, the ability to attract and implement economically viable rental arrangements, re-leasing or subdivision of properties, capitalisation rates and general economic factors such as the level of inflation and interest rates.
Real Property is by its nature an illiquid form of investment and the Direct Property Assets acquired by the Fund may take a long time to sell. In the event that the Fund needs to divest a property, time constraints may impact the ability of the Fund to achieve an optimal sale price or realise the book value of the property. There is no guarantee that the time the Direct Property Assets will be put on the market will coincide with a favourable time to sell.
Investment Risk – There is a risk that the Investment Portfolio (both Equity Portfolio and/or the Property Portfolio) will fall in value over the short or long term or may experience sustained periods of poor investment performance (absolute, or relative to benchmarks and/or competitors) or failure to meet the Investment Objectives. Fund prices may fluctuate and under perform other asset classes over time. Investors in the Fund are exposed to this risk through their holding a percentage of the Fund and through the Fund’s investment in the Equity Assets and Direct Property Assets.
Compensation Fee Structure Risk – The Investment Manager may receive compensation based on the Fund’s performance. Performance Fee arrangements may create an incentive for the Investment Manager to make more speculative or higher risk investments than would be the case in the absence of such a fee.
General Risks – There are risks associated with any investment. The value of the Fund is affected by numerous factors including hostilities, tension and acts of terrorism, general investor sentiment and the movement of prices on local and international share markets. As a consequence, the Fund carries no guarantee with respect to the payments of dividends, returns of capital or the overall net asset value of the Fund
Property markets as with share markets tend to move in cycles, and individual prices may fluctuate and underperform other asset classes over extended periods of time. Fund Investors in the Fund are exposed to this risk both their holdings in the Real Property Assets and the Equity Portfolio.
Concentration Risk – The Investment Strategy involves investment in Equity Assets. As such, the Equity Portfolio is expected to comprise 10-20 REITs at any one time. There is a risk that, because the Investment Portfolio reflects a concentration of Equity Assets with exposure to real estate, the performance of the Equity Portfolio may be adversely affected by the performance of these Equity Assets, may be subject to increased price volatility and may be more susceptible to adverse economic, market, social, or political conditions or regulatory occurrences affecting the property market. The performance of the Investment Portfolio may also be more volatile if such investment is concentrated in certain areas, such as one or two states of the 50 states in the U.S.A.
Liquidity Risk – Prior to the Offer, no public or private market has existed for the Fund. Once the Fund is actively investing, there can be no guarantee that an active and liquid market for the Fund will develop or can be maintained.
Following completion of the Offer, the ability of Fund Investors to sell their percentage or a portion of their ownership, will depend on whether there is a market for this type of investment vehicle at that time. Liquidity is a function of various factors including the size of a Fund and the cumulative investment intension of all current and possible investors in the Fund at that particular point in time. There may be relatively few, or many buyers or sellers of the Fund at any given time. This may increase the volatility of the of the market price for the Fund position, or affect the prevailing market price at which Fund Investors are able to sell their Fund position.
Given the nature of the Fund, and the fact that the Fund will not be traded publicly, depending on the amount raised under the Offer, there may be a low level of liquidity in trading the Fund. As a result, Fund Investors may not be able to sell their Fund position at the time and in the volumes or at a price they desire.
Reliance on Key Personnel – The performance of the Fund is highly dependent on one highly skilled person, who is the Investment Manager. The loss or departure of this key person and/or the inability to hire new personnel, may have a material adverse effect on the Fund’s performance or ability to grow.
Potential Conflicts of Interest – The Investment Manager is also the originator of the Fund. While the investment Manager has implemented policies and procedures to identify and mitigate conflicts of interest, it is possible that the Investment Manager may, in the course of its business, have potential conflicts of interest which may not be managed effectively and may be detrimental to the Fund and its Investors.
Political Strategy Risk – There is risk that changes in government policy, including changes to proposed infrastructure investment and supporting of commercial or residential property assets, may adversely impact the value of the Investment Portfolio or impact the ability to execute the Investment Strategy.
Dividend Risk – The Fund’s ability to pay dividends or make other distributions in the future is contingent on it making taxable profits. No guarantee can be given concerning the future earnings of the Fund, the earnings and capital appreciation of the Investment Portfolio or the return on an investment in the Fund. The Investment Manager may make poor investment decisions which result in the return on the Investment Portfolio being inadequate to pay dividends to Fund Investors.
The value and availability of credits to Fund Investors will differ depending on each Fund Investor’s particular tax circumstances. Fund Investors should also be aware that the ability to use credits, either as an offset or to claim a refund after the end of the income year, will depend on the individual tax position of each Fund Investor, and can be affected by future changes in taxation laws and policy both in the U.S.A. and Australia.
Future Capital Requirements of the Fund – There can be no assurance that the Fund will not need to raise additional capital to fully exploit business opportunities available to it as long as the Fund does not exceed 100 investors. There can be no assurance that the Fund will be able to raise such capital on favourable terms (for all) or, if it is able to raise the capital, that it will be able to invest that capital efficiently.
If the Fund is unable to obtain or invest such additional capital, the Fund may be required to reduce the scope of its investment activities or forgo an investment opportunity which could adversely affect its business, financial condition and results of operation.
Revenue and Lease Default Risk – The value of the Direct Property Assets and therefore the Investment Portfolio will, in part, depend upon the amount of rent received from tenants of the Direct Property Assets and those tenants paying rent in accordance with their lease terms.
The rental income generated by the Direct Property Assets may be affected by a number of factors including:
- overall economic conditions;
- financial condition of tenants (in relation to the risk of default);
- the ability to extend leases or to replace outgoing tenants with new tenants;
- fluctuations in rental arrears and vacancy rates and periods; and
- supply and demand in the property market at any given point in time.
In particular, tenants may default on their lease obligations, resulting in potential capital losses and/or a reduction in income to the Fund. Any resulting amount of capital loss or loss of income may not be covered in full or at all by bank or personal guarantees.
Any negative impact on rental income has the potential to adversely affect the financial performance of the Investment Portfolio and the value of the Fund.
Re-Zoning Risk – The opportunity for a potential valuation uplift on Direct Property Assets may be dependent on the re-zoning of such asset. There is an inherent risk that such re-zoning will not occur or not be as intended.
Non-Renewal and Vacancy Risk – There is a risk that a property manager may not be able to negotiate a lease extension with an existing tenant at the end of their lease, or replace a tenant on expiry with leases to new tenants on at least equivalent rental rates and other key terms in either case, within the estimated timeframes or at all.
General Application Form
This is an Application Form for investing capital as an Accredited Investor, under the terms set out in the Information Package dated October 1, 2019 (or any supplementary or replacement Information Package). You may apply for a minimum of US$100,000 in capital and in multiples of US$10,000 thereafter. For every capital investment into the Fund, a direct percentage ownership of the fund will be granted via units, commensurate with the Fund capital total. This Application Form and your wire transfer must be received prior to allocating the percentage value of the Fund then owned. Funds will be accepted on a quarterly basis, on the first day of the month pertaining to the calendar year (Jan, Apr, Jul, Oct).
If you are in doubt as to how to deal with this Application Form, please contact your accountant, lawyer, stockbroker or other professional advisor. The Information Package contains information relevant to a decision to invest in a private Fund and you should read the entire Information Package carefully before applying for participation.