Risks & Considerations

There are several risks and considerations associated with all commercial property investments which are set out below. Mackersy Property always considers risks and has a number of acquisition and investment strategies to mitigate and reduce potential risks. These are listed in the right hand column below as “Mitigation Strategies”.

Funding

Liquidity Risk Mitigation Strategies

The Tenant is unable to pay rent or on expiry (or termination) of the lease the properties may not be immediately re-let or re-let on less favourable terms.

Unforeseen major structural repair or capital expenditure may be incurred (excluding any structural repairs).

Interest rates and the bank covenants are subject to change.

Increase in interest rates may impact the return to investors.

If the Partnership is not meeting its bank covenants it may need to raise additional capital to meet the banks’ amended covenants.

Investors’ investments may be locked in for an indefinite period of time if they are able to sell their Units or until the Properties are sold and the Partnership is wound up.

At the time of selling Units, the Unit price in the Partnership may be more or less than the original price paid. Investors’ percentage interest in the Partnership may be diluted if the Partnership issues further Units to raise capital. Based on Mackersy Property’s tenant analysis, we are confident the likelihood of a tenant default is minimal. 46% of the tenancy (by net rent) are listed on the NZX. The remain 54% of the tenancy are well performing businesses with a proven track record of success.

The tenants are of high profile and have significant financial strength to ensure they can meet their obligations.

Full replacement and reinstatement insurance is put in place to cover any damage caused by insured risks and the tenants are responsible for all premiums and excesses in accordance with the leases. The tenants are responsible for all repairs and maintenance. A maintenance budget has been factored into the model of $21,932 per annum plus GST from Year 2 onwards.

Advice is provided to the directors with an interest rate hedging strategy to mitigate this risk.

The investment model allows for a mixture of fixed and floating interest rates for the first three years which will be locked in from settlement.

To the extent that any investor provides further capital, this investment would ordinarily attract a return on the additional funds invested.

Mackersy Property manage the Unit sale process endeavouring to offer the best opportunity for finding a willing purchaser; initially Units are offered to all current Unit holders under the Partnership Agreement and to Mackersy Property’s private investment group.

Any issue of further Units cannot occur without first offering the Units to existing Unit holders. Further capital invested would ordinarily attract a return on the additional funds invested.

No Guarantee

No guarantees are given by Mackersy Property or any other person in respect of the Properties, the tenants or the return which investors may receive in relation to this investment.