Diversified Development Fund – Secured Income Notes

Founded in 2019, Capital Prudential Pty Ltd (ACN 634 875 273) is a specialist fund management, asset management and advisory firm focused on creating investment opportunities while providing a complete capital solution to a portfolio of partnered mid-scale property developers across specialty commercial, industrial and boutique residential property development sectors in Australia. 

With diverse backgrounds across securitisation, treasury, accounting, law, corporate banking and real estate, our highly credentialed team have the specialist skills required in finance, legal, property and portfolio management to expertly de-risk our developments and have a proven track record in generating attractive returns through real estate development.

Jarrad was previously a Founder and Director of Accord Property, a national property development and funds management company specialising in development of small to mid-scale commercial projects.

Prior to this, Jarrad was the National Operations Manager - Building Projects for ASX listed Programmed Pty Ltd (where his was responsible for 40 commercial builders across Australia and New Zealand) and also worked as a Valuer with the South Australian Department of Planning, Transport and Infrastructure (DPTI)..

Jarrad is also Chair of Amulet Property, a Non Executive Director of Helping Hand Aged Care and Board advisor to Haigh’s Chocolates.

Sam is an experienced international finance professional and lawyer.

He is the Managing Director of Capital Prudential funds management and is also a board member of the South Australian Housing Authority.

Sam previously held board and senior management positions at Rural Bank Limited and Bendigo and Adelaide Bank. For over 25 years, he has worked across all aspects of banking including structured finance, capital raisings, mergers and acquisitions, credit, lending, operations, products and risk and compliance.

Sam has also previously been a director of Homesafe, a specialist residential property fund manager. Prior to this, Sam spent 10 years as a lawyer both in Australia and Europe specialising in international cross border structured finance transactions.

Philip is an experienced ASX 100 banking executive and property development professional.

Philip is currently also a Non-Executive Director of Credit Union SA Ltd, MyVenue Pty Ltd and Lutheran Homes Group.

Immediately prior to founding Capital Prudential, Philip was Executive Director Capital and Finance of a national funds management company that successfully completed over 40 mid-scale commercial property developments valued at circa $650m and administered property investment funds of circa $150m.

Philip was previously a Group Executive of Bendigo and Adelaide Bank Ltd where over a 24 year career he was responsible for numerous divisions including, National Property Development Finance, Structured Finance, Aged Care and Retirement Development, Medical, Managed Funds, Credit Risk and Asset Management. Philip also held the position of Chief Credit Officer and Chaired the Bank’s Credit Committee.

Philip has also previously been a Non- Executive Director of Lutheran Superannuation and a Director of the Risk Management Association of Australia.

The Secured Income Notes are registered, secured debt obligations of the Capital Prudential Diversified Development Fund Pty Ltd (Trustee) with limited recourse to the Capital Prudential Diversified Development Fund (CPDDF) assets by way of a first-ranking General Security Deed (GSD), including 100% ownership of the DevCo Unit Trusts.

CP Note Security Holder Pty Ltd ACN 658 854 221 (Security Trustee) has been appointed as the Security Trustee of the CPDDF in a Security Trust Deed and holds the benefit of security under the General Security Deed on behalf of the Secured Income Noteholders. As such, the development profit generated by each DevCo Unit Trust (net of senior debt repayments) is distributed to the CPDDF where the assets are pooled to secure the Secured Income Notes.

The advantage of this security structure is that the noteholders’ investments are secured by a diverse pool of development assets (as opposed to being exposed to a single property development). The investors have the certainty of a fixed interest return and are not exposed to the upside or downside of the development risks.

Yes. Capital Prudential derives its revenue from the excess profit of the CPDDF, which provides an extremely strong alignment of interests between Noteholders and Capital Prudential. Capital Prudential Pty Ltd, as the Trust Manager, only receives a distribution from the CPDDF once noteholder obligations are paid and unitholder interest and other internal liquidity thresholds are met.

Our success is, therefore, dependent on driving profitable developments, resulting in increased security for noteholders.

Our sustained success results from our investment discipline in selecting each asset for origination through detailed due diligence, negotiations, structuring, establishing pre-investment terms and overall project assessment using our proprietary feasibility model in addition to actively managing our diversified portfolio, including maintenance of strong financial controls, throughout each assets lifetime. At Capital Prudential, we call this process ‘de-risking’.

Capital Prudential Pty Ltd identifies the assets and uses it owns balance sheet to fund all pre-settlement expenses. Once identified, every asset is subject to a robust and detailed feasibility assessment which involves proprietary modelling and analysis to calculate a forecast Total Development Profit which is then measured against target investment criteria. For assets that meet or exceed the target investment criteria, a proposal is prepared for review and approval by the CP Board.

The ‘de-risking’ process begins once an asset development is approved. The purchase is conditional based upon several key terms, including:

• Environmental risk assessment and analysis.
• Planning and development application approvals.
• Independent valuations.
• Securing long-term lease agreements (commercial properties) or meeting pre-sales targets (residential developments).
• Engaging pre-qualified service providers.

Only when the ‘de-risking’ is complete, does the unconditional purchase occur. A special purpose vehicle (SPV) is established to purchase the asset. At settlement, the SPV re-pays pre-settlement expenses incurred by Capital Prudential Pty Ltd. The SPV is majority-owned and controlled by Capital Prudential Diversified Development Fund who manage the construction and development process through to completion and asset sale.

Capital Prudential is focussed on ‘de-risking’ at a portfolio level by ensuring:

• There is a long pipeline of developments to balance the peaks and troughs.
• Development duration is short (portfolio average 18-months) to realise profit, manage cashflow and provide liquidity.
• Diversification by geography, asset type, and builder.
• Participating in highly liquid asset markets.

Property is developed with the intention to sell versus buy and hold. Accordingly, the strategy is highly focussed on mitigating building risk, fixing building prices, minimising development time and maximising sales price reliability for each development.

An investment in the Secured Income Notes is only available to Wholesale Clients, which is a term defined under section 761G of the Corporations Act 2001 (Cth) (Corporations Act).

In summary, you must satisfy at least one of the following criteria to be eligible to invest:

• apply for Secured Income Notes with an aggregate value of at least $500,000;
• have net assets of at least $2,500,000;
• have gross income for each of the last two financial years of at least $250,000 per year; or
• be a “professional investor” as defined in section 9 of the Corporations Act.

For full details, please refer to the Corporations Act and/or speak to your accountant.

Wholesale Certificate Template that may be signed by a Qualified Accountant as evidence of Wholesale Client status.