Property Developers are facing afunding gap

Bank LVRs and Presales requirementsare getting harder

Which means there is an increasedrequirement for Equity and Mezzanine

funding

Mezzanine or 2nd mortgage funding is scarce and

when available can cost 14-20% per annum and 2%

establishment costs

Typically Project Developers issue anInformation Memorandum (IM) to raiseEquity and Mezzani funds for their

Projects

However under current regulations youcan only issue 1 offer every 12 monthsand raise a maximum of 2 Million AUD

This IM cannot be promoted openly (forinstance mass mailers, online

promotions)

And you can only make 20 personaloffers in a private manner

If wholesale investors are involved thenthe 2 Million and 20 investors rule does

not apply

But the restrictions on open promotionsand only one offer a year still apply

Beyond that you need an AFSL orapproach an intermediary who has anAFSL and can write up an offer for you

Getting an AFSL is hard and timeconsuming

And approaching an intermediary like aCrowdfunding platform with a RetailAFSL to issue a PDS increases costs

significantly

Since the PDS is issued by the AFSLthey become liable for the offer thus

increasing the risk to them

The AFSL insurance costs increase, anda project failure can mean loss of the

AFSL due to the litigation andcomplaints that may follow

This means that most AFS Licensees prefer not to issue PDS

for 3rd party Property Development projects or charge

exorbitant fees making the costs unacceptable to

Developers

In addition a PDS requires 3rd PartyCustodians/Trustees which also adds

to costs

Most Developers have Distribution listsof potential buyers and every project

has a marketing budget

Which means a pool of interestedinvestors exists beyond wholesale

investors

However the current complianceregime makes it hard to access them

There is however another cost effectivesolution that can make it easier to raise

equity/mezz funding from Retailinvestors

The Developer can issue a documentcalled as Prospectus in order to raisefunds for his Development project

A Prospectus has the same informationthat goes in an IM and has the samelevel of risk warnings that go in a PDS

Just like a PDS, a Prospectus can bepromoted openly

And under a Prospectus you can raisean unlimited amount of money

From an unlimited amount of investors

Making it a perfect solution for fundraising for Property Developers

You can raise funds for your projects on your own website

and your terms without the need of an AFSL if you go the

Prospectus route

If this is so easy, why has this not beendone before?

Typically a Prospectus is used by aCompany that is about to list on the

stock market

Listing for Businesses requiressignificant level of higher disclosures

and documentation

Which means the typical legal fees forissuing a prospectus can range from

25K AUD to 250K AUD

Issuing a Prospectus is henceconsidered a costly affair

However a Property Developer is notseeking to list his project on the stock

market

Estate Baron has created a Cookie cutter template that

Property Developers can use to issue a Prospectus for their

Development projects

The same data such as feasibility,market studies that go in an IM needs to

be filled into a Prospectus

The actual cost of filing a Prospectus with ASICand start using it is only $2350

ASIC has 2 weeks to review after whichthe Prospectus can be used

The second argument that is madeagainst a Prospectus is you need to a

Public company

But the cost of incorporation of a PublicCompany is similar to that of a PTY

PTY

You do need 3 Directors which can beyou and your associates

But having a public unlisted company as your SPV means

you can have an unlimited number of shareholder investors

The next argument made is the need foraudits and continous disclosure

However the Project SPV is a brand new entity

without any history

Main

SPV

Fundraising

SPV LTD

1st MortgageeProspectus

SeniorDebt Equity or

Mezz

It also is going to have only a few transactions in

which it gives money to the main SPV

This means there is not much to audit or report in

terms of continous disclosures

Audit costs can be as low as 2 to 5K AUD

and any financial reporting to investors can be done

online on the project website

A public company is also required to do AGMs for

shareholders but even for listed companies shareholder

meetings are sparsely attended and manageable

Shares for the public SPV can be issued as non voting

giving complete control of the process to the Developer

Dealing with many investors can beproblematic, keeping records of funds,

KYC, AML, CTF obligations

We solve that using Technology

Seamless solution with beautiful user experience allows to

manage investors, projects, and do all AML CTF KYC checks

Integrated signature tool to acceptapplications, CSV data exports ondemand. No piles of papers.

We offer a combined Compliance and Technology

package as a Crowdfunding toolkit

We will guide you through issuing the Prospectus

and assist with any ongoing compliance related

matters

And provide a crowdfunding platform branded to your

requirements in a Software as a Service model

So that you can start raising funds for your Development projectwithout worrying about compliance and its associated costs or

worrying ahbout how to handle technology

CROWDFUNDING TOOLKIT

TAILOR MADE PROSPECTUS

WHITELABEL CROWDFUNDING as aSERVICE

info@estatebaron.com

1 300 033 221

Lets compare the costs and benefitswith funding from institutional

mezzanine funds vs Crowdfunding

For a 2 Million Dollar raise the mediancost of establishment assuming 1.5%

comes to 30,000 AUD plus other fees

Assuming the funds were invested for 2 yearsat 15%, total interest is 600,00 AUD even with

out capitalization

Total cost of capital = 630,000 AUD or above

Under a Public Company SPV with prospectusmodel the fees are

ASIC prospectus fees $2350ASIC Public Company incorporation $700

Audits for 2 years $10,000

Retail investors are happy with 8 to 12%

annual returns given the lack of othercompetitive options

Assuming 10% return for 2 years on 2 MillionAUD. Total return is 400,000 AUD

Total cost of Capital under PublicCompany and Prospectus model:

$413,000

Total savings : 187,000 AUD

We charge a one time customization fee of $10,000

to customize the technology to your branding and

providing a template Prospectus

And a monthly fee of $1000 to supportand maintain the platform eliminatingall Tech administration related hassles

Even after this you end up saving $150,000 or more.

As project size increases the savings only increase!

The same technology and prospectus template can

be used for a number of future projects making the

one time cost negligible