Service Disclosure Statement


About The Property Crowd

This service disclosure statement has been prepared as at 20 March 2016 by The Property Crowd Limited (Company number 5684149).

The Property Crowd, B:HIVE, 74 Taharoto Rd, Takapuna, Auckland 0622, New Zealand (The Property Crowd or we) holds a market services licence to act as a prescribed intermediary under the Financial Markets Conduct Act 2013 and is regulated by the Financial Markets Authority (FMA). This means that The Property Crowd has fulfilled FMA's licensing requirements and standards and is monitored on an ongoing basis to ensure it maintains those standards. The Property Crowd's directors have been scrutinised to show they are fit and proper to hold office and all management and staff are vetted by us to meet the criteria as required by our licence. The key details of the licence requirements for The Property Crowd can be found at

http://www.fma.govt.nz/assets/Compliance-section/Crowd-Funding-Standard-Conditions-updated-160601.pdf

The Property Crowd provides a platform for any person (Investor or you) who wishes to consider subscribing for PropertyShares* in a company (Company) in response to an offer to purchase an investment property made via the website located at www.thepropertycrowd.co.nz

Warning Statement

Equity crowdfunding is risky. You may lose your entire investment, and must be in a position to bear this risk without undue hardship. New Zealand law normally requires people who offer financial products to give information to investors before they invest. This requires those offering financial products to have disclosed information that is important for investors to make an informed decision. The usual rules do not apply to offers by issuers using this facility. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment. Ask questions, read all information given carefully, and seek independent financial advice before committing yourself.

1. The service we provide

The Property Crowd (TPC) provides an online service on its website (Platform) allowing investors to buy (and sell) PropertyShares* in Companies that own investment properties.

The Companies are run by Property Management Companies (PMC's) who offer the properties to investors through the Platform and then manage the properties on behalf of the investors in the Company. TPC works with PMC's across New Zealand who, to reassure our investors, have processes and procedures in place that they have agreed to with us. The PMC's find and source the properties which TPC vets and then places on its Platform for funding by investors.

Investors can view their account balance, PropertyShare ownership and transaction history on their dashboard on the Platform.

2. How to apply - Investors

Investors go through a two stage process in order to invest:

  1. The first stage requires investors to register on TPC's website. At this stage investors can access the Platform through the website and view investment properties on offer.
  2. The second part is verification - necessary in order for the investor to buy (and sell) PropertyShares* in a Company and for TPC to meet its Anti Money Laundering (AML) obligations by identifying the investor under TPC's AML policy.

Verification is usually quick and carried out electronically but occasionally may be done manually where electronic verification is unsuitable. Manual verification may include certified documents or the identification of the source of funds under TPC's AML policy.

TPC is not able to verify individuals who are based overseas and as such limits its services to investors who are based in New Zealand.

TPC has the right to refuse any investor, trust or company from utilising its services as described in more detail in the Investor Agreement.

Finally the investor will be required to enter into an Investor Agreement with TPC before it can utilise the service. A copy of the Investor Agreement can be found at www.thepropertycrowd.co.nz/investor-agreement

3. How to apply - Property Management Companies (PMC)

Any PMC's interested in placing properties on the Platform will need to make an application in writing to TPC expressing their wish to obtain access to the Platform. TPC also proactively engages with PMC's across New Zealand, predominantly those based in NZ's larger cities with a good track record in property management, to encourage them to apply to access the Platform.

PMC's who wish to obtain access to the Platform will need to undergo thorough due diligence (see section 4 below) before being invited by TPC to enter into a PMC Services Agreement.

PMC's must comply with procedures and processes set by TPC to give our investors the confidence that their investments are in good hands. Regular monitoring of PMC's performance is undertaken by TPC to ensure that those standards are consistently maintained.

4. The checks we do on PMCs

Before we engage with a PMC we carry out extensive due diligence to give us confidence that their services meet TPC's standards. We look at a number of areas of operation such as:

  • Their obligations meet the relevant regulations (eg REINZ codes of practice).
  • That they have good financial systems in place to monitor rents received and expenses payable.
  • Their team has appropriate experience and qualifications.
  • Each property manager has a ceiling on the number of tenancies they can effectively service.
  • PMC's will also have policies to ensure that properties are well maintained using qualified trades people who are themselves regulated (eg health & safety compliant) and insured (eg indemnity / public liability).
  • The Directors and Senior Managers of the PMC's are required to pass Ministry of Justice checks, credit and bankruptcy checks, and to have professional memberships verified. The same checks will also be made on individuals who are to be appointed as directors of the SPV's that own properties sold through the Platform.

We monitor the PMCs' activities on an ongoing basis to ensure they remain current with their obligations.

5. How to Invest and the Information we give you

You will be given the option of investing in a newly listed property. Our properties are all open to scrutiny on our platform at www.thepropertycrowd.co.nz/properties

Each investment property offered on the Platform meets strict criteria before being offered for investment purposes. These criteria are explained in detail in the FAQ section “Property Selection”.

A property capital raise cannot exceed $2M less TPC commission and any repair allowances.

TPC's decision on a property is supported by a number of documents that include Photographs, Floor Plans, Valuation, LIM, Builders Report, Meth Report, Property Commentary, Rental Manager's Statements and Inspection Reports as well as other useful information (such as ROI). In addition, all properties are personally visited and scrutinised by one of our directors or a qualified representative from TPC.

TPC does not verify the content of the documents made available to investors by the PMC's, and makes no representation in relation to the completeness or accuracy of any information contained in the documents.

The process for investing in a property is explained in detail in our “Investor Agreement” which you are required to sign before you can deposit funds in your account. Once you have funded your account you can then choose the property you wish to invest in and offer to buy PropertyShares* in that property. Only when a new property is fully funded will your money leave our trust account in order for the property to be settled. The PropertyShares* you have purchased will then show on your dashboard on the Platform where you can track your investments. You can also choose to sell your PropertyShares* in your property(ies) at any time.

You will be entirely responsible for any decision you make to invest, or not to invest, in any investment property. TPC will have no liability to any investor under or in connection with their decision (whether in contract or tort including, without limitation, negligence, or under any other law) unless such liability arises out of the fraudulent actions of TPC or a breach by TPC of its obligations provided for in the Investor Agreement.

Other than the process described above, TPC has not made any checks and assessments on the risks involved in the PropertyShares*.

The services provided to you by TPC will not include any taxation advice of any nature whatsoever.

If an SPV you hold PropertyShares in has 10 or more shareholders, you appoint the SPV's Chairperson as your proxy for the purposes of opting out of the requirement for the SPV's financial statements to be audited. The Chairperson will exercise your proxy vote to opt out of the requirement for the SPV's financial statements to be audited each year by signing a written resolution or voting at a shareholders' meeting. This is intended to reduce costs and increase returns. However, it means you will not have the same assurance about the SPV's financial statements.

You can revoke your appointment of the proxy at any time by giving written notice to the SPV. Unless you revoke the appointment of the proxy, the proxy's sole power is to vote in favour of opting out of the audit requirement each year. The proxy will not have any other powers in respect of that appointment.

6. What we do with your money

Following verification you will be able to fund your account on the Platform and purchase PropertyShares*. Using your nominated bank account you can deposit funds into your account on the Platform ready to start the investment process. Money will always be securely held by us in our Trust Account.

When you offer to purchase PropertyShares* in a property we will allocate your funds that are sitting in your account on the Platform against your intended PropertyShares* purchase.

Once the property is fully funded your funds will leave our Trust Account to settle the purchase of the property and the PropertyShares* issued to you will show in your dashboard on the Platform. Should the property not fund fully your money will be returned to your account.

PropertyShares* ownership entitles you to dividends from the rent paid by tenants. On the 5th day of every month the PMC's deduct management fees, property costs such as rates, insurance, maintenance and repairs and our Platform fee from the account of the Company that owns the property. The balance left from rent paid is submitted to us for distribution to investors. The PMC may also choose to retain some income for planned future maintenance expenses and to keep a prudent balance in the bank account. Any such retained amounts will be disclosed to investors.

You can find out more information about this in the Investor Agreement.

7. Our Fees (Fees you pay to us)

The Property Crowd has a simple fee structure.

You pay 4% on PropertyShares* purchases.

Additional fees chargeable to the holding company (not the investor) are:

  • $1000 per annum to TPC to maintain the property on TPC's Platform and
  • $750 per annum the (SPV) company directors

TPC's fees may change at any time and we will inform our investors 30 days in advance of any change in fees.

The Property Crowd will retain any interest that is earned on investor funds in TPC's trust account for the period that they are held. This interest is retained as an administration fee.

TPC does not charge PMC's for its services.

8. The Property Crowd and its related parties

People associated with The Property Crowd (such as its directors, employees, their families and people which The Property Crowd has a business relationship with) may subscribe for PropertyShares* in any investment property. If an Investor becomes aware that a person associated with The Property Crowd has invested in a particular Company, it may not rely on this fact when making a decision whether or not to invest in that particular Company. They may also list a property on the Platform after presenting it to a PMC and if it meets the property selection requirements. In this case we would let investors know that the property belonged to a person associated with The Property Crowd.

9. Requesting copies of documents

An investor may request from TPC (for no charge) copies of relevant documents by emailing it at info@thepropertycrowd.co.nz TPC will provide an electronic copy to the investor (to its TPC member registered email address) of documents such as the Investor Agreement, the Service Disclosure Statement, terms of use, privacy policy, and warning statement within 5 business days when requested.

Each investor will be able to access a summary of its investment transaction history through the Platform on its dashboard.

10. How to contact us

Our contact details:

The Property Crowd
B:HIVE
74 Taharoto Road
Takapuna
Auckland 0622
New Zealand

info@thepropertycrowd.co.nz

12. Complaints

If an investor has any complaints or queries about the services provided by TPC, that investors should contact TPC on info@thepropertycrowd.co.nz or by writing to TPC at The Property Crowd, B:HIVE, 74 Taharoto Rd, Takapuna, Auckland 0622.

If an investor it not satisfied with TPC's response to the complaint, the investor can refer the complaint free of charge to Financial Services Complaints Limited, an approved dispute resolution scheme under the Financial Service Providers (Registration and Dispute Resolution) Act 2008. They can be contacted at: PO Box 5967, Wellington 6145 or complaints@fscl.org.nz or 0800 347 257.

Communications with, to or from TPC shall be in the English language.


* shares in a company that owns an investment property.