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Summary of

Securities Act (Airedale Developments (Auckland) Limited) Exemption Notice 2004

2004/197

Gazetted on 29 June 2004
Expires on 25 June 2009

Effects of the exemption
Airedale Developments (Auckland) Limited ("Airedale Developments") is able to offer units in a property development scheme using an alternative offer document and an independent valuer's report, rather than a registered prospectus and investment statement.

The company does not need to meet the register, certificate and record keeping requirements set out in the Securities Act 1978.

Background
Airedale Developments is purchasing a hotel building containing existing apartments, each of which is on a separate unit certificate of title. The company intends to offer the apartments for sale to investors. Investors will purchase the certificate of title for their unit, which will then be leased to Scenic Circle (Airedale) Limited. The return to investors purchasing the units will consist of rent, and any increase in the capital value of the unit. The rent paid for each unit will be based on a proportion of the total revenue for all the units in the scheme, after overheads have been deducted.

The exemption
Airedale Developments is exempted from sections 33(3), 37, 37A and 51 to 54 of the Securities Act 1978 in respect of their property development scheme, subject to conditions.

Conditions
The exemptions are subject to the following conditions:

• it is a term of each contract entered into between subscribers and Airedale Developments that -
  • each subscriber receives a registrable transfer instrument enabling them to receive the certificate of title for that unit; and
  • each investor receives a copy of audited annual financial statements no later than five months after each balance date of the scheme;
• no subscriptions are received by or on behalf of Airedale Developments unless the contract between the subscriber and Airedale Developments has been entered into;
• all subscriptions received are immediately paid into a trust account that is maintained by a solicitor;
• no subscriptions are paid out of the trust account unless paid -
  • to Airedale Developments after the subscriber has been provided with the registrable transfer instrument and after all conditions relating to the receipt of subscriptions by Airedale Developments have been met; or
  • to Airedale Developments in satisfaction of Airedale Development's right to retain the deposit in accordance with the contract, and to the subscriber, to the extent that any of the subscription remains after the deposit has been forfeited;
• before entering into the contract, each subscriber receives a written statement, signed by the directors of Airedale Developments and dated not more than two months earlier, that sets out the matters in Schedule 1 of the notice;
• the written statement contains, or has attached to it, a report by an independent registered valuer, which sets out the matters in Schedule 2 of the notice, is signed by the valuer, and is dated not more than four months before the date of the written statement;
• if the subscriber has not received a registrable transfer instrument within three years of a subscription being received by, or on behalf of, Airedale Developments, then no units may be allotted to that subscriber and the subscription must be returned promptly to the subscriber. This must be done unless Airedale Developments has given the subscriber written notice that they will not receive the registrable transfer instrument within the three year period, and that the subscriber is entitled to their money back. In that case, the subscriber and Airedale Developments must sign a written agreement extending the time for providing the registrable transfer instrument.
• if the subscriber and Airedale Developments sign a written agreement extending the time for providing the registrable transfer instrument, and if the agreed new timeframe is then not met, no units may be allotted to that subscriber, and their subscription must be returned to them promptly.

Reasons
The detailed disclosure provisions of the Securities Act 1978 and the Securities Regulations 1983 are not ideally suited to offers of real property.

The exemption recognises the protection afforded to investors by the receipt of a certificate of title for each unit under the Unit Titles Act 1972 and provides extended valuation information that provides the most relevant information to investors.

The exemption is consistent with the Commission's previous exemptions for similar offers of securities relating to interest in real property.