Frequently Asked Questions

This list is not a substitute for reading the product disclosure statement that you can download for free here. Furthermore, this is general advice only and does not take into account your specific circumstances. Past performance is not a guarantee of future performance. Please read the full general advice warning here before continuing.

List Of Frequently Asked Questions

What Is This Fund All About?

Should you decide to invest you will be purchasing units in an unlisted Australian Managed Investment Trust (MIT) that in turn owns equity in a US Real Estate Investment Trust (REIT). The REIT buys positive cashflow commercial property in Texas, Georgia & Florida.

How Much Money Has Been Raised

As at 4 July 2018 a total of A$81,074,418 of application money has been received (excluding distribution reinvestments).

How Has The Fund Performed?

Note: past performance is not a guarantee of future performance.

The total annualised return from 1 January 2013 until 31 December 2017 was 16.1% per annum (i.e. a total 80.52 cents since inception).

This return is comprised of a 40.92 cent increase in the Fund’s unit price, and total cash distributions of 39.6 cents per unit (some of which has been tax deferred as it relates to a return of capital / tax deferral due to how depreciation works).

Further information on the Fund’s performance can be found here.

What Return Can I Expect?

It is impossible to provide any guarantee about future earning’s performance.

That said, the Fund has a target of delivering a cash distribution of at least five cents per unit every six months.

Additionally, while the amount is unknown, unit price appreciation is expected to occur as the US economy strengthens and property prices increase, and should the AUD fall against the USD.

How Do I Make A Profit?

All going to plan you will profit in these two ways:

INCOME: you will receive six monthly income distributions which are paid from dividends received from the US REIT (which in turn are paid from net rental income received).

CAPITAL GAINS: as the value of the property owned by the REIT increases, or as the value of the AUD:USD decreases (below the prevailing price when you bought units) , the value of your units in the Australian MIT will appreciate.

How Frequent Are The Cash Distributions?

The Fund pays distributions on a bi-annual (six-monthly) basis.

Distributions can be reinvested, in which case no contribution fee payable thereon.

How Long Do I Have To Invest For?

Deciding to purchase units should be seen as a medium to long term investment (i.e. 5 to 10 years).

That said, you are welcome to sell your units privately to any person at any time, provided they complete the application form and meet the ID requirements (as explained in the Product Disclosure Statement).

Alternatively, there is an annual opportunity to request the Fund buy back (redeem) your units at the prevailing redemption price, which includes an amount for imputed transaction costs.

The ability of the Fund to redeem your units depends on the amount of available cash, and if more redemptions are requested than cash available, the redemption may be scaled back.

More information about redemptions is contained in the Product Disclosure Statement.

How Is The Issue Unit Price Calculated?

The price you pay for units is determined by the Fund’s net tangible assets and is priced as at the last business day of each month.

When the Fund was launched the unit price was $1. Since then, the unit price has changed with movements in the AUD:USD, as the properties acquired have appreciated, and as income has been received and expenses and distributions paid.

The prevailing unit price, together with the historical price movement, is disclosed here.

What Price Will I Pay For My Units?

As the unit price is struck on the last business day of each month, you will not know the exact ‘price’ you paid for your units until after month end, although the previous month’s unit price is a good starting guide.

To avoid large numbers of applications received towards month end, investors are offered an interest incentive to complete and submit their application form before the 20th calendar day of each month.

In such instances, investors receive interest at RBA cash rate plus 2% per annum, pro rata interest from the day they submit a completed application until the date that units are issued.

More information about this offer is included on page 20 of the Product Disclosure Statement.

What Are The Main Risks?

All investments carry some level of risk that may result in financial loss.

In this case, some of the more significant risks include: falls in the value of property acquired, the AUD appreciating strongly against the USD, vacancy and tenant risk, loss or destruction by uninsured events, loss of key staff.

Management has plans in place to handle each of the above events, but whether or not they occur cannot be reliably predicted.

A full description of the risks associated with investing are included in the Product Disclosure Statement.

Who Manages The Money / Investment?

The MIT is managed out of offices in Melbourne, Australia.

The Chairman and CEO is Steve McKnight – best selling author, professional investor, and widely regarded as one of Australia’s leading real estate authorities.

The head office team includes Davendra Prasad (CFO), Rajeev Anand (Senior Fund Accountant), Melissa Te (Finance) and Althea Levens (Admin).

The REIT is managed by Sunizo LLC (a subsidary of Ozinus Realty LLC) from Ft Myers, Florida and has staff dedicated to leasing, property maintenance and administration.

Click here to see more information on the management team.

How Big Is The Fund?

At 31 December 2017 there were 1,008 investors and total assets of $138.4m.

What Is The Minimum I Can Invest?

While the average investment in the Fund is a little over $50,000, the minimum initial investment is only $10,000.

What Is The Maximum I Can Invest?

Many investors have invested $100,000+.

Steve McKnight has more than $2m invested in the Fund, plus substantial amounts of money capitalising the responsible entity.

Note: To preserve its REIT taxation status, no single investor can own more than 10% of the equity in the Fund.

Can I Increase My Investment Later On?

Yes, but the minimum top up amount is $5,000, with $1,000 increments thereafter.

Can I Reinvest My Distributions?

Yes, distributions can be reinvested and no contribution fee is payable.

What Are The Fees?

There is a once off fee (contribution fee) of 3.60% (plus GST) every time you make a new / top up investment.

This is the cost of ‘admission’ into the Fund and pays for the time, effort and risk associated with making the investment available in the first place.

For instance, if you invest $10,000 then $360 (plus GST) of it will be deducted as a contribution fee with the balance used to buy units.

Assuming the unit price was $1.4782 (May 2018 unit price) you would receive 6,497 units.

Use this calculator to determine what your contribution fee would be and the number of units you would receive based on the unit price at 31 May 2018. Begin by inputting the amount you are considering investing below:

Amount you are considering investing
(minimum $10,000 with $1,000 increments thereafter)

Once Off Contribution Fee To Be Deducted $ $0
Approx # Units You Will Receive Units 0 units

There is also a management fee that is paid by the Fund on your behalf.

That fee is 1.80% per annum (plus GST) of the value of the Fund’s gross assets (calculated and paid monthly).

While you don’t pay this directly from your own pocket, you pay it indirectly as it otherwise reduces the amount you would receive as a distribution.

Finally there is a performance bonus which is paid if the Fund achieves a return of more than 12% per annum. The bonus payment is 20% of the excess above 12%.

Unlike other managed investment trusts, there are no exit, leasing or finance fees.

More information about fees and charges is included in the Product Disclosure Statement.

Do I Need To Add On The Contribution Fee To My Planned Investment?

No. The contribution fee will be deducted from your investment sum with the balance applied to purchasing units.

What Assets Have Been Acquired?

The Fund buys industrial, retail and office premises in Texas, Georgia and Florida.

In particular, the Fund targets multi-tenant flexible industrial properties that provide diversification in tenant base and use.

As at 31 December 2014 the Fund’s portfolio was:

By value (cost): Florida 48.2%; Texas 22.4% and Georgia 29.4%.

By use (cost): Industrial 74.6%; Retail 19.3% and Office 6.1%.

A profile of each property acquired can be found here.

Why Is There A Difference Between The Issue Price & The Redemption Price?

The Fund’s redemption price will be lower than its issue price because the redemption price includes an allowance for estimated sales costs, which are excluded in the issue price.

More Information:

The Fund’s Constitution specifies that the issue price be calculated by dividing its net assets by the number of issued units, less any amount for transaction charge.

When calculating net assets, the Fund’s property portfolio is valued at the prices provided by a qualified independent US-based appraiser. Australian Accounting Standards, which we must follow as per Corporations Law, specify that expected sale or disposal costs should be excluded from the estimate of the appraised fair market value of the properties.

When it comes to calculating a unit’s redemption price, the same formula is applied: net assets divided by the number of units on issue (before redemption), less any transaction charge.

Given the concept of a redemption price is to calculate what would have been available if all the properties were sold at the most recent appraised values, we now need to include an estimate (as a transaction charge) of the sale costs we think will be incurred when we finally do sell.

Hence, there is a difference between the issue and redemption prices because the issue price is before estimated sales costs, and the redemption price is after estimated sales costs.

When you think about it, this makes sense, because if you bought a property today, and sold it for the same price tomorrow, then you would incur sales costs on disposal which would mean you would receive back less than what you paid. That is, the price paid (i.e. the issue price), would be higher than the net sales proceeds (i.e. the redemption price).

The estimated sales costs deducted include: realtor commission, title insurance, legal fees, and other associated sales costs.

When Will The Fund Close?

The Fund is capped at 100m issued units, excluding reinvestment of distributions and units issued to the Responsible Entity in lieu of management fees. Until the cap is reached the Fund will open and close periodically. Details of when the Fund will open and close will be posted on this website.

What Types Of Entities Can Invest In The Fund?

The following entities can make an investment in the Fund: individuals, joint names, on behalf of children, partnerships, trusts (including self managed superannuation funds) and companies.

Can You Recommend Someone To Help Me Set Up An Entity?

Any competent accountant or commercial lawyer should be able to assist or refer you on to someone else.

If you’d like a cost effective way to set up a self managed superannuation fund (SMSF) then two options to consider are Superhelp and eSuperFund.

Both offer free SMSF set up (although they charge fees for annual maintenance and other services) and have confirmed that investing in the Fund is an acceptable investment.

Can Non-Australians Invest In The Fund?

While it is possible for non-Australian’s to invest, because of the extra taxation complications and additional foreign exchange implications we strongly suggest seeking independent expert advice.

What Are The Taxation Consequences Of Investing?

The taxation pertaining to this investment is complex and you are encouraged to read the advice letters contained in the Product Disclosure Statement.

Generally speaking though, Australian Tax residents will usually pay income tax on their income distributions (received each year) and realised capital gains (on disposal of their units).

Furthermore, it is expected that most Australian investors will qualify for a foreign tax credit for any US withholding or US income tax deducted on their behalf.

Be sure to consult an experienced accountant for specific advice. If you need a referral then the Fund’s accountants are Pitcher Partners in Melbourne. They have the skills to be able to assist, however any advice is of course at your own cost.

What Information Will I Receive To Help Me Manage My Investment?

Upon investing you will receive a receipt confirming your investment sum and a holding statement confirming the number of units you have been issued with.

Every time you are issued with more units you will receive an updated holding statement.

A month or so after financial year end you will receive a tax statement that summarises how to handle your distributions for Australian tax purposes.

You should provide this to your accountant to assist in the completion of your annual income tax return.

You will also be provided with an annual investment statement that summarises the movements in your investment account and confirms the balance at year end.

Naturally, if you require any further or specific information about your investment then simply call the office on 03 8592 0270 during business hours and the management team will be pleased to assist.

How Often Do Fund Investors Meet?

While not compulsory, one of the key non-financial benefits of investing in the Fund is that you will be invited to a special online and offline investor briefings where you’ll glean detailed insights into how the Fund is performing as a way of educating you about property investing.

What If I Invest And Then Pass Away, Get Divorced, etc?

In the unfortunate event of your passing what happens to your units will be determined by your Estate’s executor who would normally seek guidance on what to do from your Will.

In the event of divorce or separation then you can dispose of your units by selling them privately or seeking to have your units redeemed by the Fund (see ‘How Long Do I Have To Invest For’ above).

As a matter of good practice it is prudent to consider seeking expert estate and succession planning for all your investments, and for your adviser to canvass a variety of scenarios to help guide you on what you would like to happen.

What Is The Fund’s Maximum Debt Threshold?

When undertaking property acquisitions, the Responsible Entity permits the REIT structure to borrow up to a maximum of 60% of a property’s value (including the value of any improvements, capital costs and/or market appreciation) to finance (or refinance) the acquisition, provided that the portfolio’s gearing ratio will not exceed 40% of its fair market value.

The actual carrying amount of debt currently in the Fund changes from time to time.

The latest numbers can be sourced from the periodic financial statements.

How Do You Plan To Finance/Fund Redemptions?

Redemptions will be financed from new investor applications, surplus operating cash, refinancing and / or sale of assets.

There is a risk that there is insufficient cash available to meet all redemptions, in which case the redemption may be delayed or reduced.

While management will do its best to manage this issue to the best of its ability, a lack of liquidity is an inherent risk associated with all unlisted property trusts.

When & How Will The Fund End?

The Fund will be wrapped up, and all investment capital returned to investors, on or before 31 December 2029.

Can I Reserve Money Now & Invest Later?

You are welcome to nominate an amount you would like to invest, however this cannot be reserved for you as it is ‘first come, first served’ with the remaining capital that is available.

Once the $75m limit is reached the Fund will close to new and top up investments, and the distribution reinvestment program is expected to cease.

How Can I Invest?

In order to make an investment you need to:

Step One: Download the information pack that contains the product disclosure statement and application form.

Step Two: After reading through the material, if you want to invest you need to complete the application form.

Step Three: To complete your application you must send the form, certified ID and your investment sum to Plantation Capital Ltd, PO Box 532 Canterbury, VIC 3126.

Step Four: The Product Disclosure Statement contains more information on what ID is required to support your application and how to get copies of your ID certified as a true copies of an original

Your investment sum can be via cheque or EFT. Details are outlined on the application form, which is included in the information pack.

What Is The Quickest Way To Remit My Money?

While you are welcome to send us a cheque, the quickest way to remit your investment sum is to transfer the fund electronically.

Alternatively, you can pay your investment by making a deposit direct into our account at the Commonwealth Bank.

The Fund’s bank account information is included on the application form which is contained in the information pack.

Be sure to retain a receipt evidencing your EFT or deposit and include a copy in with your application form and copy of your certified ID.

Where Do I Send My Application Form?

If time is tight you can email a scanned copy of your application form, certified ID and EFT / deposit receipt to: admin@passiveincomefund.com.

Even if you send an email, in all cases an original application form, original certified true copy of your ID and cheque or evidence of EFT / deposit should be mailed to:

Plantation Capital Limited
PO Box 532
Canterbury, VIC 3126

What If I Have More Questions Or Need Help?

You are warmly invited to send your unanswered questions to admin@passiveincomefund.com (expect a reply within one business day).

Otherwise call the office on 03 8592 0270 during normal business hours and we’ll do our absolute best to assist on the spot.

General Advice Warning: This information is of a general nature only and does not take into account your objectives, financial situation or needs. You should consider the Product Disclosure Statement (dated 4 July 2018) issued by Plantation Capital Limited ACN 133 678 029 AFSL 339481 in deciding whether to acquire an interest in the Passive Income (USA Commercial Property) Fund. PropertyInvesting.com Pty Ltd is an authorised representative of Plantation Capital Limited ABN 98 096 059 353, AFSL 339481. Past performance is not a guarantee of future performance.