Folkestone Real Estate Income Fund At Wollongong

Fund Overview

The Folkestone Real Estate Income Fund at Wollongong (Fund) is a single asset, closed end unlisted real estate fund.

Fund Type The Fund is a single asset, closed end unlisted real estate fund.
Investment Strategy

The Fund owns 43 Burelli Street and 34 Stewart Street, Wollongong, a six level A-Grade office building comprising 9,812 square metres together with parking for 90 vehicles. The Fund is forecast to provide:

1: a distribution yield of 11.00 per cent in FY171; and
2: the potential for capital growth through active asset management.

Key Financial Information

Distributions Forecast distribution yield to Unitholders is 11.00 per cent in FY171.
Distribution Payments Quarterly
Tax Deferred Distributions Distributions are anticipated to include a tax deferred component. The distribution for FY17 is forecast to be 47.4 per cent tax deferred2.
NTA The Fund’s NTA value per unit as at 30 June 2016 was $1.18. Excluding the negative impact of accounting for the hedging the Fund has in place, the Fund’s NTA value per unit increases to $1.22.
Gearing The Fund’s gearing ratio as at 30 June 2016 is 39.5 per cent.

Fund Term

Fund Term – Timeframe and Liquidity

The term of the Fund is six years unless Unitholders vote by way of Special Resolution to:

1: sell the Asset and wind-up the Fund earlier; or
2: extend the term of the Fund.
Due to the illiquid nature of the Fund, Unitholders will not have a right to redeem their interest in the Fund during the Fund Term.

1 – Based on the Issue price of $1.00 per Unit. Distributions are not guaranteed. For further information, please refer to Section 6 of the PDS.

Our Board – Folkestone Funds Management Limited

Grant Hodgetts
Non-Executive Chairman
BA, Assoc Dip Val, AAPI, MACID
Greg Paramor AO
Managing Director
FAPI, FAICD, FRICS
Ross Strang
Non-Executive Director
LLB (HONS), MAICD
Adrian Harrington
Head of Funds Management
B.SC (HONS), FFINSA, MAICD

Our Executives – Folkestone Funds Management Limited

Greg Paramor AO
Managing Director
FAPI, FAICD, FRICS
Adrian Harrington
Head of Funds Management
B.SC (HONS), FFINSA, MAICD
Ben Dodwell
Head of Real Estate
BA (I.D.), Grad. Dip. App. Fin. SIA, DIP PROP FIN, MAICD
Travis Butcher
Chief Financial Officer – Funds
B.Acc, CA, Grad. Dip. AFI SIA
Scott Martin
Chief Financial Officer & Company Secretary
B.Com, CA
Mark Stewien
General Counsel
LL.B, BCom (Finance)

Asset Overview

Corporate Square is an A-Grade commercial office building located in the Wollongong CBD. Completed in 1988, the six level building has a total lettable area of 9,812 square metres together with parking for 90 vehicles – 72 basement car spaces and 18 secure external car spaces. Corporate Square is currently 98.3 per cent leased with a weighted average lease expiry profile (by income) of 2.7 years. The Asset comprises a strong tenancy mix anchored by Commonwealth and State Government tenants who currently contribute approximately 74 per cent of the Asset’s income.

Folkestone has selected the Asset given:

  • the potential for capital growth as the acquisition price of $23.27 million was 5.8 per cent below the independent valuation of $24.70 million and 17.3 per cent below the estimated book value of $28.15 million;
  • it was acquired on a passing yield of 12.0 per cent;
  • the Asset was 98.4 per cent leased at acquistion;
  • the strong lease covenants – Commonwealth and State Government tenants delivering key social services to the Illawarra Region contributed approximately 79 per cent of the Asset’s income at the time of acquistion;
  • the opportunity to refurbish and upgrade the Asset to reduce operating costs, improve the NABERS Energy rating from 3 Stars to 4.5 Stars and increase the rents and value of the Asset;
  • opportunity to improve the lease expiry profile of the Asset by extending the lease terms of the existing tenants or leasing the space to new tenants on longer term leases when a sitting tenant vacates;
  • it is recognised as one of Wollongong’s leading commercial office buildings and is located in the heart of the administrative zone; and
  • Wollongong is undergoing a transformation as it continues to reposition itself from a manufacturing to service based economy.

The Asset has large floor plates of approximately 1,600 square metres with minimal column interruption, providing efficiency and flexibility for tenancy layouts. The floor plates are designed around a central core which incorporates the three passenger lifts, male and female amenities and services such as electrical, telecommunications and fire equipment. All floors provide a modern standard of finish and fit out. Accommodation comprises a mixture of open plan offices, partitioned offices, meeting rooms and court rooms (in relation the Family Court of Australia premises). Outdoor balcony areas are on Levels 1 and 5. The Asset enjoys natural light on all sides, with excellent views across Civic Plaza to the north, the ocean to the east and the Illawarra escarpment to the west.

Since acquiring the Asset in June 2013, Folkestone has commenced an active asset management program to improve the lease expiry profile, reduce operating costs, improve the NABERS energy rating from 3.0 to 4.5 starts and enhance the overall amenity and tenant satisfaction with the building.

Folkestone’s active management of the asset has paid dividends in the past year. As at 30 June 2015, 46.2 per cent of the net lettable area was either leased to new tenants or renewed to existing tenants. During FY15, Folkestone completed Stage 1 of a major capital works program to upgrade the building’s heating, ventilation and air-conditioning (HVAC) and install a new building management system (see below).

Improving the Efficiency and Sustainability of Our Assets for the Benefit of Tenants and Our Investors

Folkestone does not just acquire assets like Sydney Olympic Park or manufacture new assets like Millers Junction Home with long leases to blue-chip tenants. We are happy to secure older assets or assets with short-term leases where we can apply our real estate expertise to add value. Our acquisition of Central Square, Wollongong for the Folkestone Real Estate Income Fund at Wollongong is a classic example of acquiring a building from the receivers below valuation and where the previous owner had spent very little money maintaining the asset.
Stage 1 of the capital works program was successfully completed in December 2014 and was delivered for $2.55 million, $0.3 million below the budget and with minimal tenant interruption. The works included upgrading the building’s heating, ventilation and air conditioning (“HVAC”) and the Building Management System (“BMS”), installing LED lighting throughout the lift, lobby and corridor areas, new electrical switchboards, rewiring for all equipment installed and retrofitting three vacant suites (two of these are now let).

As a result of these works being completed, the building’s systems are working more efficiently. For example, electricity costs have fallen 66.4 per cent from circa $21,000 per month in December 2013 to circa $7,000 per month in June 2015. Over the same period, total greenhouse gas emissions have declined 65.6 per cent – a win for the environment, a major selling point to the tenants in the building and improved investment performance for the Fund’s investors.

During FY16 we will commence Stage 2 of the capital works program. This will see the upgrade of levels 1-5 lift lobbies, corridors, and the ground floor. These additional works aim to breathe fresh life into the public areas of the building, provide an enhanced work place environment for tenants and improve the potential for tenant retention.

Investor Centre

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Reports & Publications

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Distributions & NTA

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Tax Components

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Frequently Asked Questions

1. How much are my Distributions?

http://folkestone.com.au/wollongong/Distributions & NTA

2. Where can I find the Fund's NTA unit price?

http://folkestone.com.au/wollongong /Distributions & NTA

3. How do I invest?

The Fund is a closed end fund not open for new subscriptions.

4. Is there a Redemption Facility for the Fund?

No redemption facility is available.

5. Can I sell my Units in the Fund?

A Unitholder can transfer Units in the Fund to another person by providing the Responsible Entity with a completed standard transfer form signed by both the transferor and the transferee. The Responsible Entity reserves the right to decline transfer requests in its absolute discretion including when a transfer is not completed correctly, is not stamped or if any one Unitholder would hold more than 20.0 per cent of Units. Tax implications could be associated with the transfer of Units. Unitholders should discuss their circumstances with their professional adviser before requesting a transfer.

6.How much is the distribution?

Forecast annualised distribution for the period 1 July 2016 to 30 June 2017 is forecast to be 11.00% p.a. This distribution is based on the an issue price of $1.00. Distributions are not guaranteed.

7. When are distributions paid?

Distributions are paid quarterly for the periods ending 31 March, 30 June, 30 September and 31 December.

8. How do I have payments paid directly to my bank or building society?

To receive your distribution payments by direct credit into your bank or financial institution account, or to change previously advised account details, you must provide written advice to the Unit Registry. In some cases, this advice can be provided online. Please refer to the Unit Registry for more details.

9. How do I change my investment details (e.g. name, address, method of payment, etc)?

To make changes to your investment details, written advice must be forwarded to the Unit Registry. In some cases, this advice can be provided online. Please refer to the Unit Registry for more details.

10. How can I get another copy of my holding statement?

Send your written request for a duplicate statement to the Unit Registry. Please include the following information:

– Full name of the registered Unitholder, Unitholder Number, Name of the Issuer, The registered address of the Unitholder, Number of units held and the Signature of the registered Unitholder

Please note that a charge may be levied for this service.

11.How can I give notification of my Tax File Number (TFN)?

Advice of TFNs can be given in writing to the Unit Registry or lodged online via the Unit Registry’s website. You can download a TFN notification form from the Unit Registry’s website. You may choose not to provide your TFN, however if you do not provide your TFN your distribution will be taxed at the highest marginal rate.

12. When will I receive updates on my investment?

If you invest directly into the Fund, and not via an IDPS, master trust or wrap account, the Responsible Entity will provide you with a:

– Confirmation Statement – specifying details relating to your investment or redemption; Regular Reporting – a quarterly report updating the Fund’s operations and updates on major activities about the Fund;

– Distribution Statement – a quarterly distribution statement detailing the distribution amount, payment date;

– Annual Report and Audited Accounts – an annual report and audited accounts for each 12 month period ending 30 June; and

– Tax Statement – an annual tax statement setting out the Fund’s tax position each year.

The regular reporting including the Annual Reports and Audited Accounts will be available on Folkestone’s website (www.folkestone.com.au/) and will be sent electronically to you if you have elected to receive it via email. Hard copies of these reports will not be sent out unless you have requested on the Application Form or in writing to us.

13. Where can I get an Annual Report for The Fund?

Go to the Reports and Publications section of this website where they are available in electronic format.

14. How can I choose to receive or no longer receive the Annual Report?

This can be requested by writing to the Unit Registry.

15. How do I contact the Unit Registry?

The Unit Registry’s contact details are as follows:

Boardroom Pty Limited
GPO Box 3993, Sydney NSW 2001
Telephone: 1300 737 760
Facsimile: 1300 653 459

Email: enquiries@boardroomlimited.com.au
Website: http://www.boardroomlimited.au/

16. When will I receive my annual tax statement?

A tax statement for the tax year to 30 June is mailed to all Unitholders who have held an investment in the Fund during that financial year. The tax statements are typically mailed out six to eight weeks after 30 June each year.

The tax statement summarises the distributions paid during the year and includes information required to complete your annual tax return such as the tax advantaged component of the distribution.

17. Does the Fund hold an Annual General Meeting?

The Fund is not required to hold an Annual General Meeting unless it chooses to do so.

18. How do I contact the Manager?

Go to the Contact Us component of this web page or use the details below:

Folkestone Funds Management Limited
Level 14, 357 Collins Street, Melbourne, Vic 3000

Telephone: +61 3 9046 9946
Fax: +61 3 9046 9999

19. How can I log on to view information of my holding in the Fund?

Please visit: https://www.boardroomlimited.com.au – InvestorServe

20. Do I have to tell you when I change financial advisers?

You are not obliged to advise us when you change financial advisers, however to ensure that your adviser is able to obtain information regarding your investment, it is best that you do notify us.

A letter confirming your new adviser’s details, signed by all security holders should be sent to the Unit Registry.

21. How should I deal with a deceased estate?

To change the holding into the name of the estate a certified copy of the death certificate and will or probate (if required) will need to be sent to Investor Services to be noted on the register.

Please contact our Unit Registry for further information on administering a deceased estate.

22. Forms

The following forms are available at: http://www.boardroomlimited.com.au/Forms.html

Annual Report Election

Change of Address

Direct Credit Authority

Non Market Transfer – Unlisted Funds and Structured Products

TFN, ABN or Exemption Notification

23. Disclaimer:

The information contained on this webpage is of a general nature only and does not constitute financial product advice. This webpage has been prepared without taking account of any person’s objectives, financial situation or needs. Because of that, each person should, before acting on this webpage, consider its appropriateness, having regard to their own objectives, financial situation and needs. You should consult a professional investment adviser before making any decision regarding a financial product. This is not an offer to invest in the Folkestone Real Estate Income Fund at Wollongong. Investment in the Fund can only be made by completing the application form for the Fund within the Fund’s Product Disclosure Statement (PDS). None of FLK, FFM or any of their respective associates, related entities or directors guarantee the performance of the Fund or the repayment of monies invested.

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