The legal structure of our projects involves several different companies which serve different functions. There is a Special Purpose Vehicle (SPV) company which owns the development site, and there is a separate company which holds investor capital. The SPV company is typically named [Project Address] Pty Ltd while the capital-holding company is typically named [Property Address] Capital Pty Ltd.
When an investor invests in the project, they receive shares in the capital-holding company, usually at a rate of one share per $1,000.
The capital-holding company then provides the capital to the SPV via a secured loan agreement, with the loaned amount being secured against the assets of the SPV, which is the development site. The interest repayments that the SPV makes on the loaned capital is what comprises the investors’ returns.
This structure means that investor capital is collectively secured against the development site via a secured loan agreement. In the event of a project failure or insolvency, the capital-holding company (which represents the investors) can seize the assets of the SPV (the development site) to recoup their loaned capital. If the worst-case happens, investors can sell the site to get their capital back, or take another course of action, depending on what the shareholders vote to do. However, depending on the nature of the secured loan agreement between the capital-holding company and the SPV, investors are not guaranteed to be in a first lien position. The amount of interest charged, and thus the return to investors, reflects the lien position of the loan.
The SPV company also enters into a Management Agreement with Lion Property Group to oversee the project as Project Managers. As the Project Manager, Lion Property Group is responsible for completing the development on behalf of the Company and the investors. This involves, but is not limited to:
- overseeing all administrative tasks required to complete the project;
- appointing and collaborating with town planners, architects, land surveyors, and engineers to complete development plans;
- submitting the plans to Council and obtaining all relevant approvals as required by the jurisdiction of the development site;
- representing the investors at civil tribunals relating to the project, if required;
- obtaining financing from a lender to fund construction;
- selling the developed properties in-house, or appointing a realtor to assist with sales.
This investment structure is utilised because it ensures that investors are protected, but grants us the ability to undertake the development in a timely and efficient manner in line with investor expectations.