Zagga CRED Fund

ZI is a boutique investment manager and non-bank lender which has an established reputation in the Commercial Real Estate Debt (“CRED”) sector. CRED is provided by traditional and alternative lenders and is a subset of the broader Private Debt asset class which allows exposure to the property sector but avoids the high cost of buying and owning an investment property, and the limited liquidity such an asset offers. CRED instead provides the ability to be secured by underlying property assets which ensures lenders have recourse if the borrower defaults on their Loan.

The Investment Manager’s objective is to generate high yielding alternative investment opportunities through facilitating the funding of high-quality loan transactions.

The Investment Manager’s success to date is based on the competence of its team, the efficiency of its bespoke platform, and the extensive experience of its executives and contracted advisors. ZI’s expertise covers the full process from deal origination to asset recovery.

The Investment Manager has been operating as a CRED funder since 2017, during which time it has consistently delivered strong, annualised returns to its investors across a range of loan purposes, credible counterparties, comfortably valued security properties, and efficient investment management and reporting.

Alan practised for a short time as a solicitor, prior to embarking on a more than 30-year career in banking and finance, mostly as a C-suite executive in two publicly listed banking groups. He has worked in the UK, South Africa and Australia and has consulted widely to owner-managed businesses across strategy, technology and operations. Alan’s entrepreneurial pursuits include being co-founder of a Sydney-based family office investment advisory business and developing a home loan over the phone business for a large Australian insurer. Alan co-founded Zagga in 2016 and has held the CEO role since inception.

“Since our first loan investment in 2017, we have demonstrated to our investors the value of including CRED-type alternative investments in their investment portfolios. These investments are typically non-correlated to equity markets, can be inflation-proof, and deliver consistent and sustainable annuitized returns well above bank deposit rates without a commensurate increase in risk.”

Marcus is the Co-Founder of Zagga NZ (formerly LendMe), which he started in 2014. He is also the Co-Founder of Zagga and is Executive Director, working closely with the CEO, especially across strategy, governance and stakeholder relations.  Prior to his Zagga involvement, Marcus worked extensively in large banks and financial services businesses in the United States, United Kingdom, Europe and Africa.

Frank has been involved in the finance and property industry for 25 years. He is a Certified Funds Manager and Property Valuer and is a Fellow of the Australasian Institute of Banking & Finance and Governance Institute of Australia.  Prior to his last bank role as Senior Associate Director/Acting State Director NSW for ANZ Bank’s Corporate Property Group, Frank held senior and management positions in Corporate, Institutional and Property divisions in Australia’s major financial Institutions.

Frank has completed several development projects in his own right in various capacities including financier, developer, superintendent and advisor.  Frank holds a Master’s degree in Property Investment & Development.

Tom is Director, Investments at Zagga where he overseas loan origination and credit underwriting.  He is an experienced banker and property developer/investor with substantial experience in investment for special situations and real property via both private credit and mainstream capital markets.

Previous roles include Relationship Credit Manager ANZ Corporate Property Group; Associate Director ANZ Singapore; and Associate Director Secured Lending, with work completed for major Australian banks, fund managers, insolvency firms and private developers.

Steven has been a part of the core team since inception and comes with a high level of experience in portfolio management, investor relations and capital markets.  As a Chartered Accountant (CA ANZ), Steven is primarily responsible for Zagga's treasury management and deployment.

Matthew brings with him a wealth of experience in the Australasian financial markets having led the treasury division at British, Japanese and US investment banks.  From there, he moved into funds management developing currency, commodity and global macro strategies that were awarded five years running in the Australian & Asian Hedge Fund Awards.

Matthew has extensive experience in marketing the alternative asset space.

Commercial Real Estate Debt (CRED) refers to loans made to commercial borrowers who require funding for real estate purposes

• Loans maybe used to purchase or develop, vacant land or property buildings
  
• Land or property is mortgage collateral for the loan, and investors earn income from the fees and ongoing interest paid on the loan
  
• CRED ranks ahead of equity 

All individuals, Self Managed Super Funds (SMSFs), companies and trusts that meet the criteria of a Wholesale Investor (or ‘Sophisticated Investor’) as defined under the Corporations Act 2001 (Cth) can invest in Commercial Real Estate Debt through Zagga.

There is no maximum to the amount you can invest. By fractionalising all our investors’ funds, you can fully fund a loan, invest directly across several loan opportunities, or invest via one of our Funds to enable you to diversity your investment portfolio.

There are a number of methods to diversify your investments through Zagga:

• loan purpose (land-bank facility, construction, residual stock, bridging loans)
• property type (residential, commercial, industrial or vacant land)
• property location (metro, regional, state)
• loan term
• loan to value ratio (LVR)
• Security is always 1st registered mortgages and can be over residential property, commercial property, industrial property or vacant land.

Investors who choose to invest via one of our Funds enjoy natural portfolio diversification from the diverse, carefully selected mix of loan types in which the Funds invest.

If you decide to invest directly, the investment term is for the duration of the loan that you have opted into. Therefore, if you agree to fund a 12-month loan, your money will be committed to the loan for the full duration, unless the loan is repaid early.

If you choose to invest via one of our Funds, the minimum investment term is determined according to the terms of each Fund:

Zagga CRED Fund

• Minimum lock-up period of 12 months

Zagga Feeder Fund

• Minimum lock-up period of 12 months
• Notice Period – 90 days

Zagga Wealth Fund

• Minimum lock-up period of 3 months
• Notice Period – 30 days

Please note:  Investment Term is a guide to assist with investment decisioning. Construction funding has a high probability of term extensions, which can be caused by weather delays, supply chain disruptions, market risk for sale, funding risk for refinance, administrative and regulatory authority delays, or any other change in market conditions. Any ‘Minimum Investment Term’ relates to the minimum period in respect of which Interest is payable to the Investor.

Investors are contracted to the full term (including any extensions) of the transaction. An investor may not withdraw from the transaction prior to complete discharge of the transaction, except with Zagga’s express written consent, which is given entirely at its own discretion and which may be withheld.

Zagga maintains a $0 loss history to investors. The business has zero realised credit losses across over $1.5Bn of loan originations dating back to inception in 2017.

Zagga’s Management and Board has significant experience across the real estate sector in operational, lending and recovery roles, focused on achieving superior risk-adjusted returns for our investors.

Our proactive management of all borrower facilities means we are constantly stress testing all our loan exposures to changes in rental yields, capitalisation rates, general market conditions and the effects of these on all factors and valuations.

Like any type of investment, potential investors should always understand the risks involved and we encourage all our investors to conduct the due diligence necessary to make the best investment choices for their risk appetite and investment criteria.

All investments carry some degree of risk, and generally, higher rates of return are associated with higher risk of loss of capital invested or investment returns.

Before you make an investment decision it is important for you to identify your investment objectives and the level of risk that you are prepared to accept. Zagga provides a tool to assist you in determining your investment objectives and risk tolerance, however Zagga does not provide you with personal advice that any investment you make will be suitable for your personal circumstances or that the investment will meet your investment objectives. Therefore, we recommend you seek independent financial advice before making a decision to invest.

The significant risks in investing funds to be advanced under a loan include:

• Credit risk

The risk of loss arising from the failure of a borrower to repay some or all of the money they owe.

• Borrower defaults

If a borrower defaults, there may be shortfalls where the sale proceeds of the security property are not sufficient to recover in full, the invested funds and costs incurred by the Trustee in enforcing or recovering the repayment of principal and interest under the relevant loan.

• On winding up of the Trust

After trust property has been realised and costs and other expenses have been deducted, if there is a negative dollar amount (shortfall) in the calculation of the entitlement of an investor to a distribution, the Trustee may ask the investor to pay such shortfall if the Trustee in its discretion, believes to do so is in the best interests of all of the Trust’s investors, requiring the investor to have contributed more than the original principal invested.

• Term of investment and liquidity risk

Subject to the terms of the Trust Deed, once you have agreed to invest funds in respect of a particular loan, you are committed to the investment for the full duration of the loan term, which can range from three months to two years. Therefore, once exposed to a loan, your investment is essentially illiquid in nature. You may be unable to convert to cash, the portion of the principal component of a loan you agreed to fund. You must take this into consideration when deciding on what loan types will be suitable for you in light of your overall investment portfolio and needs.

We acknowledge the risks of investing to fund loans and have put in place many checks and controls to mitigate your exposure to risk:

• all applicants undergo rigorous screening including a full identity check, credit history check to determine their expected ability to service debt, and risk-assessed by our team of experienced credit professionals
• all loans are secured by a registered mortgage over residential property, commercial property and/or land, in addition to any other security that might be required from a borrower as part of the loan approval terms
• investors’ money and borrowers’ repayments are held separately from Zagga’s own assets, in a bank account in the name of the Zagga Investments Lending Trust. Loan funds are only released to the borrower when the loan is finalised and settled by our solicitors
• we monitor all loans and borrower repayments closely and will take immediate action if a borrower fails to meet their repayment obligations.

Despite these measures, if a loan default occurs, there is a risk that an investor with a beneficial interest in the loan:

• may not receive all of their monthly payments
• could lose a portion or all of the principal amount they have invested to fund that particular loan,
• could potentially be required to contribute towards any shortfall on winding up of the Trust.

Therefore, you need to be comfortable with the level of risk you are exposed to when choosing the risk level of the loans you are willing to fund, the terms of the Trust Deed, and investing in this manner generally.

It is important to note that while you, as an investor, have a beneficial interest in the loans that you have invested in, only the Trustee of the Zagga Investments Lending Trust has the discretion under the Trust Deed to exercise a right in respect of loans that form part of the trust property. The Trustee may, but is not obliged to, consult with investors exposed to a loan about how the Trustee should exercise the rights attached to that loan, including rights to enforce, compromise or waive repayment of the loan.

You should be aware that Zagga accepts no risk whatsoever, nor gives any undertakings regarding the prospects of any loan or that it is a suitable investment for you. Zagga makes every effort to gather all relevant information, applies generally accepted credit principles in assessing the loan, and uses a well-defined matrix to determine a Credit Assessment Score. You must review all available loan and Trust Deed documentation, satisfy yourself as to the risks involved with investing to fund a loan, and understand that you will bear any losses in proportion to your fractional share of each loan in which you are invested.

Once a borrower submits a loan application, we will conduct a thorough assessment of their financial position. This includes an examination of:

• their financial situation
• credit history to determine their expected ability to make monthly repayments (serviceability)
• any prior defaults or insolvencies (credit history)
• suitability of credit product (requirements and objectives).

If a borrower’s loan application is approved, we will assign a credit score that reflects their credit risk, based on the Zagga Credit Assessment Score, and will assign the applicable interest rate to the loan.

We do not accept applications from borrowers with past insolvencies or bankruptcies and reserve the right to decline any loan application at our discretion.

To ensure that we maintain an ‘arms-length’ relationship amongst borrowers, investors and Zagga, we have set up processes and structures to ensure that investors’ funds and borrowers’ repayments, are managed by a separate trust structure, the Zagga Investments Lending Trust.

Each loan is separately established within the Zagga Investments Lending Trust. Investors’ interests are not pooled. This is to protect investors’ funds and to ensure that activity in one loan does not affect another. Zagga Investments Pty Limited enters the loans as trustee of the Zagga Investments Lending Trust, and holds the associated rights and benefits in respect of the loan and the mortgage security, and amounts paid by a borrower as trustee for the investors. Each investor investing in a loan has a beneficial interest in the loan and the security proportionate to the amount that the investor invests.