Montreal Property Syndicate LP

There are a number of risks that could impact on the performance and financial returns of the Limited Partnership. Potential general and specific risks include, but are not limited to, the following:

Liquidity of Property
Property is an inherently long-term investment and cannot be easily sold. The Property may be sold at a loss in which case Limited Partners will not be able to recover the full amount of their original investment. There is no guarantee of capital gain on the Property.

Tenants
The tenants of the Property may fail to pay the rental and outgoings (defaulting) which may affect projected returns. Also, the current tenants may not renew lease arrangements and new tenants may be required. Costs, including lease incentives may be required on re-leasing and the tenancies may not be immediately re-let or may be re-let on less favourable terms.

Interest
Interest rates may increase (and consequently increase the mortgage repayments due from the Limited Partnership to the bank). Changes to bank loan terms and conditions, for example in respect to interest rates, bank margins, loan to value ratios, principal repayment requirements etc, either as a result of bank policy changes or the requirement that the bank comply with changes to external regulatory requirements may affect the LP. The GP will actively monitor the interest rates during the life of the LP.

Funding
If the Limited Partnership is not meeting its bank covenants it may need to raise additional capital to meet the bank’s covenants. At the end of the term of its financing, the Limited Partnership will need to enter into new lending facilities or raise additional capital to repay the funds under the lending facilities.

Interest Rate Hedge
There is a risk that the capital raised and the equity in the Property investment is insufficient for the Limited Partnership to fund sustained high interest payments or puts pressure on compliance with any financing covenants (such as loan to value ratio (LVR) covenants).

Damage or Destruction
The Property may be destroyed, and the event may not be adequately covered by the insurer of the Property. The GP arranges insurance on the Property and recharges this cost to the tenants, in accordance with the leases.

Capital Expenditure
The capital expenditure for the Property may be more than budgeted. Significant additional capital expenditure in excess of forecast amounts may be required for a number of reasons, including undertaking structural repairs or related work to bring the Property up to a designated standard or to meet new requirements resulting from changes to current regulations or standards.

Underwriting Arrangement
There is a risk that the Offer will not be fully subscribed for and the Underwriter will be required to subscribe for the shortfall Units. If the Offer is not fully subscribed then, on the settlement date of the Property, the LP will be liable to pay the underwriter a drawdown fee of 2% of the total amount subscribed for by the underwriter under the underwriting agreement. If the LP is unable to find purchasers for any shortfall Units and repay the underwriter within five months of the drawdown date, the LP will pay the underwrite a penalty return of 9% per annum payable monthly in arrears. This may affect the LP, including the performance and financial returns of the LP.

Liquidity of Units
While Units in the LP are transferable, a buyer of such Units may not be found and investors may not be able to realise their investments in the Limited Partnership before the Property is sold and the Limited Partnership distributes the proceeds or is otherwise wound up. At the time of selling the Units, the value of the Units may be more or less than the original price paid. Investors’ percentage interest in the Limited Partnership may be diluted if the Limited Partnership issues further Units to raise capital.

Fees
The property management fees, corporate management fees and performance fees outlined in section 5.11 of this Information Memorandum may increase over time.

Forecasts
Actual results are likely to be different to the forecasts since anticipated events frequently do not occur as expected and the variation may be significant and material. No warranty or representation is made in respect of whether the revenue, expenses, or any capital appreciation in the future will be achieved. Prospective investors should obtain their own independent valuation, legal, accounting and income tax advice in respect to their own individual circumstances.