FRP Capital Brickworks Information Memorandum July 2023 - Flipbook - Page 24
Brickworks Marketplace
Information Memorandum
Risks /
Other Issues
MARKET RISK
CAPITAL LOSS
UNEXPECTED CAPITAL EXPENDITURE RISK
Economic, technological, political and legal conditions, and market
sentiment, can and do change. Changes in investment and property
markets can affect the value of the Fund’s investment. The Manager
uses research and analysis to form a view on these matters as best
it can and will look to optimise the time at which it buys and sells
the Property.
There is no guarantee that a capital gain will be achieved on
the eventual sale of the Property and a capital loss is possible.
In the event of unexpected capital expenditure the Manager will
use cash reserves from the Trust Owners Contingency. Should
expenditure be greater than the amount held in cash reserves,
the Manager may borrow against the unencumbered equity of
the Property.
FINANCE RISK
The Manager will look to arrange the debt facility according to the
details in the IM, but there is risk the details of the debt facility may
be different. Increases in interest rates during the Term of the Trust
may lead to lower returns for Investors.
LIQUIDITY RISK
Units in the Trust are illiquid and it is unlikely that there will be a
secondary market for Units. The Trustee may have difficulty in
selling the Property at the end of the term. An investment in the
Trust should be considered long-term and illiquid.
TAXATION OF TRUSTS
Taxation law is constantly evolving and being amended. Changes
to taxation legislation during the term of the Trust may impact
adversely on an investment in the Trust. Investors are advised to
obtain their own professional taxation advice.
DISPUTES AND DEFAULTS
In the ordinary course of its operations, the Trust may be involved
in disputes and possible litigation with tenants or other service
providers. There exists a risk that a material or costly dispute or
litigation (including any applications to the Supreme Court for advice
and directions) could affect the expected income of the Trust.
INCREASE IN OUTGOINGS
Any increase in outgoings that are not recovered from tenants may
reduce the income payable to Investors. Inflation and interest rate
fluctuations may affect the income and resale value of the Property
and therefore the value of the Trust’s investment in the Property.
VACANCY RISK
When a lease comes to an end, or prematurely terminates, the
Trustee would need to find a new tenant which it may not be able
to do, or it may take some time to do so. As a result of a tenant
vacancy, the income of the Trust will decrease, and the value of the
Property may be negatively affected which has a flow-on effect to
the overall value and returns from the Trust.
CURRENCY RISK
The Trust’s investment will be denominated in Australian dollars
and therefore the weakening of a country’s currency relative to the
Australian dollar will negatively affect the value of the Trust from
the perspective of an international Investor. Among the factors that
may affect currency values are trade balances, the level of shortterm interest rates, differences in relative values of similar assets
in different currencies, long- term opportunities for investment and
capital appreciation, central bank policy and political developments.
CAPITAL EXPENDITURE RISK
Future capital expenditure on the Property could exceed expectations,
which could result in increased funding costs and lower distributions.
DEVELOPMENT RISK
If the Manager decides to proceed with any redevelopment or
refurbishment work at the centre, there is a potential that the
budgeted cost for these works could be exceeded, which may
impact forecast distributions. We will aim to mitigate these
risks by using quality consultants and diligently managing the
redevelopment process.
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