WO2013067576A2

WO2013067576A2 - Methods for dealing in real property

Info

Publication number: WO2013067576A2
Application number: PCT/AU2012/001362
Authority: WO
Inventors: Kent DAVIS
Original assignee: Davis Kent
Priority date: 2011-11-08
Filing date: 2012-11-07
Publication date: 2013-05-16
Also published as: WO2013067576A9; AU2012334802A1

Abstract

The present invention provides a method for facilitating investment and/or monetizing equity in real property, the method comprising the steps of: providing a total valuation amount or an obligation value amount of a real property, and creating an instrument having an initial value based on the total valuation amount or the obligation value amount. Also provided is a method for facilitating investment and/or monetizing equity in real property, the method comprising the steps of: providing a total valuation amount or an obligation value amount of a real property, dividing the total valuation amount or obligation value amount into two or more unit valuation amounts, and creating an instrument having an initial value based on one of the two or more unit valuation amounts.

Description

METHODS FOR DEALING IN REAL PROPERTY

HELD OFTHEINVENTION

The present invention relates to the field of financial investment, and particularly in methods for investing in real property such as land, commercial property and residential property.

BACKGROUND TO THE I NVENTION

Many classes of investment are currently available to retail and institutional investors including equities, bonds, currencies, commodities, debt instruments, and property.

Real property (such as a residential property) is a preferred form of investment for a number of reasons. A significant basis for the attraction is that real property is a physical asset, that may be asaibed a reasonably certain value. Furthermore, while property values increase and decrease over time, historically the general trend is upwards. 3nce 1955, Australian residential property has increased on average by 8.6% per annum (and from 1987 has increased by 12% per annum), with similar gains being noted in other countries EEven where property values decrease it is virtually impossible to completely lose the investment, and it is of ten the case that the market recovers in due course.

Thus, real property is more secure than investment in an equity, for example. The true value of a share in a company can be difficult to estimate given the vagaries of company valuations. Furthermore, history has demonstrated many times over that the value in a company can be lost rapidly, with investors facing the loss of all capital.

While clearly desirable, investment in real property requires the commitment of significant funds to cover the purchase price of the property, as well as the costs of pre-purchase building inspection fees, legal fees, bank fees associated with the establishment of the loan, duties, mortgage insurance and the like. Further, there are the many ongoing holding costs such as rates, insurance, utilities, maintenance etc The opportunity to buy a home or directly invest in residential property has become difficult as disposable incomes lag behind real asset growth. Therefore, affordability has made entry into real property ownership for many difficult.

Property investment also involves a great deal of time and effort required in researching and inspecting multiple properties, negotiating with real estate agents, attending meetings with bank managers, lawyers and the like.

As a further negative, purchasing an investment property typically requires the title of another property to be held as security by the mortgagor. It is sometimes the case that parents of an aspiring property owner reluctantly allow their residence to be used as collateral for a son or daughter's first property.

Another problem is that investment properties are generally leased to a tenant in order to offset the burden of loan repayments. Considerable effort and expense is required in attracting and retaining a quality tenant. EEven where a tenant is carefully selected, rent may not be timely paid or the property may be damaged. This may leave the property investor out of pocket, and perhaps unable to service the loan.

EExit fees for an investment property are also relatively high and often include early loan termination penalties payable to the mortgagor, real estate agents fees, advertising fees, etc. Sgnificant entry and exit fees contribute to less than desirable liquidity for investment properties and other forms of real property. It is generally the case that during the first 15 years of a property purchase, the high acquisition, funding and holding costs tend to erode the capital growth potential of the residential property even when the property owner is in receipt of rental income.

It is a further problem that as populations age and living expenses increase, pressure mounts on home and property owners to meet a myriad of costs within the constraints of underperforming assets and income streams. This is particularly evident over the next two decades as members of the "baby boomer" generation retire. These costs may include those associated with the operation of the home/property or may be completely independent of that structure e.g. supporting children, renovations, health issues, travel, investment et cetera. Individuals of an older demographic are generally averse to increasing their debt positions, and as consequence are often short of funds for general living. While reverse mortgages can be used by property owners for obtaining funds to cover living expenses, these products are essentially high cost loan products whereby the property owner is obligated to eventually repay a debt, including interest. Accordingly, reverse mortgages are an expensive option. A problem for many individuals in securing debt facilities is the negative impact on domestic cash flow caused by interest repayment schedules. It is an aspect of the present invention to ameliorate or overcome a problem of the prior art by providing improved methods for investment in real property. The discussion of documents, acts, materials, devices, articles and the like is included in this specification solely for the purpose of providing a context for the present invention. It is not suggested or represented that any or all of these matters formed part of the prior art base or were common general knowledge in the field relevant to the present invention as it existed before the priority date of each claim of this application.

SUMMARYOFTHEINVtiNTION

In a first aspect the present invention provides a method for facilitating investment and/or monetizing equity in real property, the method comprising the steps of : providing a total valuation amount or an obligation value amount of a real property, and creating an instrument having an initial value based on the total valuation amount or the obligation value amount. In a second aspect there is provided a method for facilitating investment and/or monetizing equity in real property, the method comprising the steps of: providing a total valuation amount or an obligation value amount of a real property, dividing the total valuation amount or obligation value amount into two or more unit valuation amounts, and aeating an instrument having an initial value based on one of the two or more unit valuation amounts. In one embodiment, the step of dividing the total valuation amount into two or more unit valuation amounts comprises the step of dividing the total valuation amount by a number (n) to provide two or more units having an equal value. The value of n may be at least about 20, 50, 100, 500 or 1000. In certain embodiments, the instrument does not allow for or obligate the transfer of beneficial interest or beneficial ownership or right in the real property. The methods may be devoid of the step of transferring a beneficial interest or beneficial ownership or right in the real property.

The instrument may be a legal instrument and/or a financial instrument, and in some embodiments allows a holder of the instrument to benefit from any increase in the value of the real property over the time that the instrument has been held by the buyer. The instrument may be configured or adapted so as to be tradeable.

The methods may comprise the step of providing a means for distributing income provided by the real property (or at least a proportion of that income) to a holder of the instrument. In a third aspect, the present invention provides an instrument (which may be a legal instrument and/or a financial instrument) having a value based on an underlying real property, the instrument configured or adapted to allow for a buyer of the instrument to benefit from an increase in the value of the underlying real property but without obligating or allowing transfer of beneficial ownership, or an equitable interest, or a right in the real property.

In one embodiment, the value of instrument is based on a fraction of the underlying property. The fraction may be calculated by dividing the value of the underlying property into n units, with n being at least about 20, 50, 100, 500 or 1000 in some embodiments. In a preferred embodiment, the instrument is a retail residential property derivative.

While it may not allow for or obligate the transfer of beneficial interest or beneficial ownership or right in the real property, the instrument may nevertheless allow a holder of the instrument to benefit from any increase in the value of the real property over the time that the instrument has been held by the buyer. In one embodiment, the instrument isconfigured or adapted so asto be tradeable.

In a fourth aspect, the present invention provides a computer-readable memory containing processor executable program instructions for creating a unitized security in a real property, the program instructions comprising the steps of: accepting a data input being a total valuation amount of the real property or an obligation value amount, and dividing the total valuation amount or obligation value amount into two or more unit valuation amounts.

In one embodiment, the program instructions solve the equation UV=TV/n, where UV is the unit valuation amount, TV is the total valuation amount, and n is the number of units required. In one embodiment the program instructions solve the equation UV=OV/n, where UV is the unit valuation, OV is the obligation value amount, and n is the number of units required.

In yet a further aspect the present invention provides a computer-readable memory containing processor executable program instructions for creating a proportional amount of a real property for the purpose of unitizing a security in a proportion of a real property, the program instructions comprising the steps of : accepting a data input being a total valuation amount of the real property, and multiplying the total valuation amount by a fractional number to provide an obligation value amount. In one embodiment, the program instructions solve the equation OV=TV x F, where OV is the obligation value amount, TV is the total valuation amount, and F is a fractional number. The value n may be variable, and may be at least about 20, 50, 100, 500 or 1000.

9ill a further aspect of the present invention provides a computer-based exchange for the trading of an instrument, the computer comprising program instructions, the program instructions comprising the steps of: accepting a first data input being an offer price for an instrument as described herein, accepting a second data input being a bid price for an instrument as described herein, comparing the offer price and the bid price, and outputting an execution instruction where the offer price equals the bid price. The instrument may be transacted either on a straight through exchange platform structure or via a managed fund structure whereby the bid (exit) and offer (entry) unit prices would be quoted on an exchange and then straight through transacted by investors

In one embodiment, the computer based exchange comprises a computer, the computer comprising computer readable memory, the computer readable memory comprising program instructions to solve the equation:

(TV x F)/n, where UVi is a unit valuation amount representing an indicative offer price, TV is the total valuation amount, F is a fractional number and n isthe number of units required. In another embodiment, the computer-based exchange comprises a computer, the computer comprising computer readable memory, the computer readable memory comprising program instruct ions sol ve t he equation UV₂=(OV- (OVx AMR))/n, where UV₂ is a unit valuation amount representing an indicative bid price, OV is the obligation valuation amount, AMRis the applied market risk and n is the number of units required. The value n may be at least about 20, 50, 100, 500 or 1000.

The UVi (entry) and UV₂ (exit) prices may also be used as the entry and exit unit prices for a managed investment structure. In such a situation, the AMR value would also cover the investor transaction costs of each instrument purchase or sale. The base methodology for calculating the indicative bid and offer price on a straight through exchange is applicable similarly in a Managed Fund structure where the Investment Manager rather than the Investor would be using these calculations asthe price guidance.

In one embodiment of the computer-based exchange, the execution instruction is configured or adapted to commence a settlement activity required by the exchange. The exchange may be configured or adapted so that a transaction between a buyer and seller remains visible for a time period selected from the group consisting of at least about 1 , 2, 3, 4, 5, 6 or 7 days. In one embodiment of the computer- based exchange, the execution of the instrument involves the purchase or sale of units in a Managed Fund structure where the Fund Manager executes multiple transactions involving the instrument on behalf of the Investors of the Fund. The net asset value (NAV) unit prices reflected in the unit entry and exit prices of the Fund would constitute the combined aggregated intrinsic value of all the instruments in the Fund at any particular time. H¾FDE9CHPT10N OFTHE FIGURES

Rg 1 relates to a straight through trading exchange and shows a price matrix and the various data element headings including the code of the security unit, AMR ORV, CCV, the Certified and Indicative prices, the trading indices, the Certified and Indicative unitised prices and the individual price fields for each security unit where investors and property owners submit their straight through offer and bid prices.

Rg 2 relates to a straight through trading exchange and is a schematic diagram showing the relationships between the database populated with key data relating to the underlying property and the proprietary process that enables the origination and unitization of the property instrument into smaller value units and the subsequent listing of those units on an exchange.

Rg 3 relates to a straight through trading exchange and is a schematic diagram showing the flowchart of the SOUP process from the initial stage of extracting key data through to the aeation of individual price fields for each of the smaller value units that constitute a property instrument listed on a special purpose exchange.

Rg 4 shows a transaction of five (5) units illustrated by a red bar with the words 'Settlement Pending' and instantly replaced by an identical set of price fields on the exchange and both sets of price fields remain displayed together until after the settlement date at which time the transacted price fields are removed and archived.

Rg 5 shows the Certified and Indicative prices for providing a guidance for investors in the price matrix but additionally how investors are free to submit their own price values pursuant to free market principles. Rg 6 shows a trading index over a 24 month period based on the CCV value of a property inputted every 6 months to the exchange.

Rg 7 shows the creation of three different PEER indexes based on the CCV of a property - Illustrated are an individual index based on the CCVs for each underlying property used to create a PEER (code T); a consolidated state index incorporating all the CCVs of underlying properties for each state (code 'S) ({V,N,Q,¾W,T,N) and a national index combining all the underlying residential property prices in all states (code 'Ν'). Rg 8 shows a flowchart of how transacted price fields remain listed on the exchange until after settlement and how the duplicate replacement price fields remain listed after the transacted price fields are removed and archived.

Rg 9 shows a typical price matrix illustrating all the key data elements and the variation in bid and offers aeated by the straight through inputting of real time prices by investors and/ or property owners.

Rg 10 shows a newly listed security instrument (PEER) with 100 listed smaller value units that have yet to receive any inputted bid or offer prices from investors and/ or property owners. At the top of the price matrix in the data headings are the indicative bid and offer unit prices represented by CPVu and IPVu.

Rg 11 shows a flowchart of how a single unit once transacted shall remain listed with its duplicate price field until settlement after which time the transacted field shall be removed from the exchange and all transacted data archived.

Rg 12 shows a flowchart demonstrating that five (5) single units once transacted shall remain listed with five (5) duplicate price fields until settlement after which time all transacted five price fields shall be removed from the exchange and all transacted data archived. Rg 13 shows that each individual price field of a security unit can be expanded out into three lines of depth by clicking on either the bid or offer price. In this figure, there is only one seller but three different bidders. Rg 14 shows how a eld Coefficient Value (YCV) is configured in the guidance price set for a financial instrument created from an underlying income generating investment property asset.

DETAILED DE9CHPT10N OF THE INVENTION

After considering this description it is apparent to one skilled in the art how the invention is implemented in various alternative embodiments and alternative applications. For example, the instruments of the present invention may be transacted on a straight through exchange platform where investors submit their own bid and offer values based on a set of intrinsic or indicative listed bid and offer prices. Alternatively, investors may transact the units in a Managed Fund structure where the value of the Fund's portfolio of instruments provide the NAV entry and exit unit prices quoted on an exchange such as the New York 9ock .Exchange. These prices would be fixed as opposed to embodiments based on a straight through exchange where an investor may nominate his/her own price range. It is understood that the core methodologies relating to the instrument used by both structures are the same. Further disclosure of these alternative embodiments and transactions is presented infra.

Although various embodiments of the present invention isdescribed herein, it is understood that these embodiments are presented by way of example only, and not limitation. As such, this detailed description of various alternative embodiments should not be construed to limit the scope or breadth of the present invention. Rjrthermore, statements of advantages or other aspects apply to specific exemplary embodiments, and not necessarily to all embodiments covered by the claims. Unless the contrary intention is expressed, the features presented as preferred or alternative forms of the invention can be present in any of the inventions disclosed as alone or in any combination with each other. Throughout the desaiption and the claims of this specification the word "comprise" and variations of the word, such as "comprising" and "comprises" is not intended to exclude other additives, components, integers or steps.

In consideration of the problems detailed in the Background section herein, Applicant proposesthat one or more barriers to entry in real property investment can be decreased or even removed by the present invention. In a first aspect the present invention provides a method for facilitating investment and/or monetizing equity in real property, the method comprising the steps of : providing a total valuation amount or an obligation value amount of a real property, and creating an instrument having an initial value based on the total valuation amount or the obligation value amount.

It is noted that some embodiments of the present methods are distinguished from prior art methods in that an instrument according to the present methods (an exemplary form being a property derivative security) does not confer any right or ownership in the real property i.e. the underlying asset. As distinct from the present invention, prior art methods are established around equity based configurations whereby an owner of an equity unit in a property receives a direct proportional ownership of the underlying asset. These embodiments provide certain advantages, as more fully described elsewhere herein. It is appreciated, however, that some embodiments of the present methods involve a right of beneficial ownership in the underlying asset. Where the present invention relates to an instrument (as more fully described infra) the instrument may, in some embodiments, be configured or adapted such that no change in beneficial ownership results from the purchase or sale of the instrument. However, the present invention does not necessarily exclude circumstances where the instrument is a security or where the instrument is used in a direct property transaction involving equity or interest in a property constituting a change in beneficial ownership may occur, possibly requiring amendment of the property title. The ability to invest in real property without the necessity of transferring ownership or an equitable interest in the property provides advantages to the investor. For example, according to the present methods the investor does not necessarily incur any of the normal liabilities associated with property ownership. These liabilities may be financial liabilities (such as land tax, duties, owners' corporation fees, or council rates) or legal liabilities (such as liability for any injury occasioned on the property, or damage to an adjoining property).

The lack of transfer in beneficial ownership or an equitable interest may also provide advantage to the owner of the real property subject of the present methods. For example, the owner may retain use of the property (for example, as a primary residence, holiday home or business premises) while still able to monetize the property. The monetization will typically be in the form of cost -free investor funds received by the owner. A cash payment in consideration of a unit paid by an investor to the property owner will not constitute a formal loan arrangement to the extent that it will not attract interest or require periodical repayment schedules up to the redemption date at which time the face value of the security unit based on the current valuation of the underlying property asset is paid out to the investor. This arrangement may be particularly suitable for retirees who wish to remain living in their usual residence, but require funds for living expenses. Dependent on the rights and/ or obligations created in the instrument, the retiree may retain the right to reside in the real property until the property issold, or until their death.

It is appreciated that the present methods may be characterised as a non-loan product (to the extent that no interest or periodical repayment schedules are involved), and therefore distinct to a reverse mortgage which attracts interest with repayment schedules clearly defined. According to the present methods, the property owner is not obligated to a formal debt structure, and therefore is not subject to interest charges or obligated to make periodical repayments. The avoidance of a structured debt, associated interest charges and periodical repayments are significant advantages of the present methods.

Alternatively, a property owner of any age demographic may carry an existing level of structured debt (with interest and repayment schedules) and still participate in the listing of a property security instrument provided that debt is no more than a certain percentage (typically 30%) of the certified valuation amount of the property, ie a 30% LVR (loan/ value ratio). A further advantage is that an investor may participate in the property market in a country that prohibits or otherwise adversely controls the beneficial ownership of real property by foreigners. According to some embodiments of the present invention, beneficial ownership of real property may not transfer to the buyer of an instrument meaning that a non-national investor may fall outside the scope of any legislation relating to property ownership.

In another aspect the present invention provides a method for facilitating investment and/or monetizing equity in real property, the method comprising the steps of: providing a total valuation amount or an obligation value amount of a real property, dividing the total valuation amount or obligation value amount into two or more unit valuation amounts, and creating an instrument having an initial value based on one of the two or more unit valuation amounts.

In one embodiment, the created instrument is configured or adapted to have a value based only or predominantly on capital growth of the real property. In circumstances where the real property is rented, the aeated instrument may be configured or adapted to have a value based only or predominantly on a combination of the capital growth of the real property in addition to a rental yield value.

Applicant has discovered that the process of providing a unitized security, the value of which is based on the value of a real property, provides significant advantages over prior art methods for investment in property. A person or entity seeking to invest in real property now has the opportunity to purchase a unitized security for a relatively small sum of money that will increase or decrease in value according to the underlying value of the property.

Application of the present invention may reduce the entry cost level for a residential property investment and optimise the capital growth component of that investment by minimising the impact of those elements that erode capital growth over time. i.e. high acquisition, funding and holding costs The inventive methods may allow an investor to invest directly in the capital growth (and optionally the rental yield) of the underlying property asset from a low cost base and without the high acquisition, funding and holding costs normally associated with beneficial interest or beneficial ownership or right in a property.

Additionally or alternatively to being useful to investors, the present met hods are capable of implementation by an owner of a real property seeking to monetize equity in that property. In a preferred form of the invention, the method is for facilitating investment and monetizing equity in real property. The ability of the present methods to assist both property owners and property investors is a significant advantage over prior art methods. The advantages afforded to both parties is discussed elsewhere herein.

As distinct from existing property investment vehicles such as equities (including investment trusts, real estate investment trusts, and listed property trusts), corporate property derivatives such as swaps (i.e. rental income, call/put options) the present invention is directed in some aspects to a retail property derivative that is based on a fixed valuation amount of an underlying property asset and is not based on a valuation amount set by the trading of an index. The actual monetary value of the derivative (whilst potentially fractionalised by the unitization process) is directly proportional to the value (optionally the certified value) of the underlying asset or a fractional part of that asset.

The unitization step (that is, the process of dividing the total valuation amount or the obligation value amount into two or more unit valuation amounts) may result in units of relatively low value, thereby allowing for investment in real property for relatively small amounts of money. This opens up the possibility for individuals having limited funds available (or indeed even the time and/or expertise required to purchase property) to participate in direct property investment. This represents a significant advantage over prior art methods. A further advantage of certain embodiments of the present methods is that a property investor can enter into diversified investments across different classes of real property e.g. commercial, residential, freestanding, apartments et cetera. Diversification according to geography is also facilitated, providing the opportunity to concurrently invest in properties within the inner city, outer suburban regions, regional centres, growth corridors and country areas for example. The low cost of entry provided by the unitization step allows an investor to purchase a security (or a parcel of securities) in a number of properties for a relatively low cost. Diversification is important in any investment portfolio, with the present invention facilitating that critical requirement.

Advantageously, an investor may access a diversified portfolio of investments utilising the present invention where multiple instruments associated with a variety of properties are acquired by a Managed Fund with Investor funds. The Managed Fund would manage the acquisition process of multiple security instruments and will typically quote NAV unit entry and exit prices on a national stock exchange, with investors able to straight through transact these units (i.e. buy or sell). Alternatively, the units may be subscribed by an investor through managed services networks requiring a Prospectus or Product Information Document under a jurisdictional licensing arrangement with investment advisers, brokers, accountants, and the like.

Without wishing to be limited by theory in any way, investment in a single property asset may carry approximately six times the risk associated with investment in a national diversified property index or diversified portfolio of property assets. The instrument (because of its low cost base) allows investors to purchase multiple investments in an independent straight through exchange or units in a Managed Fund that invests in a property spread thereby minimising investor risk.

In certain forms of the methods the real property is held in a trust structure. Each unitised security unit acquired by an investor may be secured by a once only registered mortgage over the underlying property asset and held by an independent trustee for and on behalf of all investors byway of atrust structure. The purpose of the registered mortgage is not in the defence of a debt but a provision that is designed to prevent a property owner from selling the underlying asset without executing their contractual obligation to pay out the investor the face value of the unitised security unit(s) at redemption date. As used herein, the term "real property" is intended to mean any land, or any land having improvements (such as buildings, fencing, landscaping, irrigation and the like). The term also includes any real property that does not comprise land per se, such as an apartment in an apartment complex. In preferred embodiments of the methods the real property is improved land, of the type typically offered for sale to the public as "commercial property" or " residential property". More preferably, the real property is a residential property. Residential property is particularly attractive given that it is readily comprehensible to retail investors, and typically provides attractive capital growth over time.

The real property may be a single property or may be a parcel of properties. The real property may be defined by a single property title or may be spread across multiple titles. Preferably the real property is a single residential property having a valuation of less than about $5,000,000.00 (value in Australian dollars, the value of the Australian dollar with reference to other currencies being as provided on the filing date of this application).

The owner will often desire to unitize only a portion of the real property. Typically, this desire will arise from the owner's wish to enjoy the benefits of some capital growth in the property, or to leave a share in the property to a spouse or child in a will. In that circumstance the methods may utilize an obligation value amount. The obligation value amount representsthe proportion of the real property that isthe subject of the instrument, and may be any percentage of the total valuation amount from a figure of greater than 0% to less than 100% In certain forms of the methods, the obligation value amount is less than about 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% or 5% of the total valuation amount. The obligation value amount may be calculated by multiplying the total valuation amount by an obligation reference value (which is a fractional number). In light of the foregoing it is understood that the composition of the real property that isthe subject of instrument according to the present invention is immaterial to the operation of the methods, however certain types of real property provide particular advantages in the art.

Furthermore, it is understood that an owner of the real property is not required to fully own the property. An owner may still have a mortgage on the real property when participating in the present methods, however it would be expected that only the proportion of the property in which the owner has equity could be the subject of an instrument of the present invention. In one embodiment, the owner of the real property subject of the present methods is one or two natural persons, or a single corporate entity.

The step of providing a total valuation amount for the real property may comprise the use of any property valuation method known to the skilled artisan. The value may be arrived at by reference to a municipal council valuation, a valuation based on a survey of recent sales in the area, a valuation by a taxation authority, a property index, or may be a sworn or certified valuation. In the broader context of the present invention, the accuracy of the valuation is not critical and may be simply a gross estimation. However, in preferred embodiments of the methods the valuation method results in the issuance of a sworn or certified valuation, of the type issued by a Certified Practicing Valuer as provided for in Australian practice. Similarly certified property valuation professionals are provided for in the practice of the other countries, and are considered as equivalents to a Certified Practicing Valuer for the purposes of the present invention.

Certified valuations and the like are proposed to increase market participation in the present invention given the greater level of certainty provided to an investor. In prior art methods of property investment, property buyers do not generally seek an independent valuation given the expense involved obtaining valuations for multiple properties that are under consideration. It is especially the case when a property is purchased at auction that the investor may pay over what would be a fair price. Investors who purchase property at an inflated price are unlikely to achieve maximal return on a property investment.

After providing the total valuation amount or the obligation value amount, the method requires the unitization to provide two or more smaller unit valuation amounts. The number of valuation units created is referred to herein as "n". As an example, the total valuation amount of the real property may be $500,000.00, and the owner wishes to retain 50% of the property, in which case the obligation value amount is $250,000.00. The obligation value amount is then divided into two equal units (i.e. n=2), with each unit having avalue of $125,000.00 each.

It is understood that in some embodiments of the method the resultant units will not be created equally, and in the foregoing example one unit may be valued at $100,000.00, and the other at $25,000.00. After aeation, the instrument representing a unit may be traded and it would be expected that value of the instruments will vary according to the varying bid and offer prices proposed and inputted by investors.

However, in a preferred embodiment of the method the units are equal. Thus, in a preferred embodiment of the method, the step of dividing the total valuation amount or obligation value amount into two or more unit valuation amounts comprises the step of dividing the total valuation amount or the obligation value amount by a number (n) to provide two or more units having an equal value.

Whether or not the units are created equal, n may be selected from the group consisting of 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 , 12, 13, 14, 15, 16, 17, 18, 19, and 20. Thus, for a residential property having a total valuation amount of $500,00.00, an obligation value amount of $250,000.00, n=25, and all units are equal, the cost to purchase a single unit is based on $10,000.00. While the number (n) may be any positive number, greater advantage may be gained for higher values of n. Accordingly, in certain embodiments of the method the number (n) is greater than 20, and may be selected from the group consisting of 21 , 22, 23, 24, 25, 26, 27, 28, 29, 30, 31 , 32, 33, 34, 35, 36, 37, 38, 39, 40, 41 , 42, 43, 44, 45, 46, 47, 48, 49, and 50. Thus, for a residential property having a total valuation amount of $500,000.00, an obligation value amount of $250,000.00, and where the number of units is 50, and all units are equal, the cost to purchase a single unit is based on $5,000.00.

Greater levels of unitization may afford still further advantage. In certain embodiments of the method, the number (n) is greater than 50, and may be greater than 60, 70, 80, 90, or 100. Thus, for a residential property having a total valuation amount of $500,000.00, an obligation amount of 250,000.00, and where the number of units is 100, and all units are equal, the cost to purchase a single unit is$2,500.00.

9ill higher levels of unitization may provide greater advantages. For example, some embodiments of the method provide that the number (n) is greater than 200, 300, 400, 500, 600, 700, 800, 900 or 1000. Thus, for a residential property having atotal valuation amount of $500,00.00, an obligation amount of $250,000.00, and where the number of units is 1000, and all units are equal, the cost to purchase a single unit is based on $250.00.

The skilled artisan appreciates that there is a practical upper limit to the degree of unitization, and understands that units of minimal value may be difficult to sell, or that the cost of the sale may make selling economically unviable.

In order to more fully understand the nature of the instrument subject of the present methods, regard may be had to the overall aim of the invention. As is apparent from the inventive disclosure herein, some embodiments of the invention facilitate the participation of an investor in a real property investment without the investor receiving any beneficial interest or beneficial ownership in a property, but nevertheless still being capable of benefitting from any increase in the economic value of the real property. Thus, in certain embodiments it is intended that the instrument provides for an arrangement between the property owner (or an agent of the property owner) who is a first party to the instrument and a buyer (or an agent of the buyer) who is a second party to the instrument. The instrument may be any means obligating the owner of the real property (or an agent of the owner) to provide a benefit to a holder of the instrument (or an agent of the holder) upon satisfaction of some predetermined condition, such as when the real property is sold or otherwise disposed of, or the owner dies, or where the owner buys back the instrument. The obligation may or may not be a legal obligation (i.e. an obligation arising under statute or common law), and may in some circumstances be a moral obligation.

The benefit may be pecuniary in nature, and is embodied in the form of a payment to the holder, the value of payment being proportional to the holding. Thus, where the instrument defines a 1% share of a real property which is sold for $500,000.00 the holder of the instrument receives a payment of $5,000.00 (or an amount based on $5,000.00).

Benefits other than those of a pecuniary nature are contemplated, and include anything whatsOFVer of potential worth or value to an instrument holder. Non-pecuniary benefits include a good, a service, a share in an asset, or an exercisable right. Alternatively, a benefit may be in the form of an avoided detriment, or the waiving of a loan for example. It is open to the skilled person to identify other forms of benefit, with all such benefits being included in the ambit of the present invention. It is to be understood that it is not necessary for the instrument to directly bind the owner of the real property and the instrument holder. For example, the instrument may bind the owner or operator of an exchange platform through which the instrument is traded to provide the benefit to the holder. In those circumstances, the owner or operator of the exchange platform will typically be obligated to in turn receive benefit from the owner of the real property.

In a preferred embodiment of the method, the instrument does not allow for or obligate the transfer of beneficial interest or beneficial ownership or right in the real property. In a further preferred embodiment, the method is devoid of the step of transferring a beneficial interest or beneficial ownership or right in the real property. In a preferred form of the method, the instrument is a legal instrument with the real property owner's obligation being enforceable in a court, tribunal, or similar institution. Preferably the legal instrument is embodied in the form of a written contract, agreement, or memorandum.

Alternatively or in addition to the instrument being legally binding, the instrument may be a financial instrument. It is appreciated that a financial instrument of the present invention may be a derivative instrument given that the value is derived from the value of the underlying real property. In such circumstance, the property owner on one side would in part or whole aim to protect the market or certified property value by writing an instrument (listing) in the event of it falling in value, whilst on the other side the investor would aim to profit from any future gain in the certified property value. Thus, the instrument may, in certain embodiments, be a property derivative product that does not assign any interest or right in real property, but is a contractually based arrangement executed between a property owner and an investor.

Therefore, another advantage of the instrument relates to the living index which reflects cost of living whereby a property owner can write an instrument (list) against an underlying property asset and access cost free capital to assist with such costs without impacting their beneficial ownership of the underlying property asset.

In another embodiment the method may be considered to comprise the acquisition of a contractual right to a part of the future sale proceeds of the real property underlying the instrument. Therefore, whilst no interest in land is assigned in the method, there is however an interest in the security that contractually affords to the investor a potential benefit should they predict the correct direction of the value of the underlying real property. This may constitute a contractual obligation to the investor by the property owner.

In a preferred embodiment, the instrument is configured or adapted so as to avoid or circumvent the provisions of any rule, law, by-law, legislation, precedent, code of conduct, or regulation that would otherwise negatively affect the owner of the real property, the buyer of an instrument or the seller of an instrument. For example, the wording of the instrument may be such that a property tax (such as stamp duty) is not payable on the purchase of the instrument, or that the offer price for an instrument is excluded from any restrictive provisions governing the sale of real estate, or that the sale of the instrument does not fall under foreign ownership laws etc. Typically, the instrument specifies that no beneficial ownership or interest or right in the real property is conveyed.

Qher parties and arrangements in the instrument are contemplated in the context of the invention, however for convenience an example will now be used to more fully describe the nature of the instrument.

In an exemplary form of the method, the buyer buys the instrument at a first time point, the value of the instrument being based on the value of a unit, the value of the unit in turn deriving from of the value of the underlying real property. For example, the real property may have a total valuation amount at $5,000,000.00, and an obligation valuation amount of $2,000,000 divided into 10,000 equal units (n=10,000), each unit having a value of $2,000.00. The financial instrument representing a single unit could be sold to a buyer for $2,000.00 as an indicative price level. A condition of the instrument may be that the buyer is paid a proportional share of the sale price of the real property. At a second time point the owner elects to sell the real property, and is obligated by the instrument to pay the holder a proportional share of the sale price. In this example, the value of the real property has increased to $3,000,000.00. Accordingly, the owner is obligated to pay each holder the sum of $3,000.00 per unit. It is appreciated that the holder of the instrument achieves a profit of $1 ,000.00 on their investment of $2,000.00. While the value of a unit is based on the value of the underlying real property, it is understood that the sale cost of each unit may be adjusted to include surcharges over and above the purchase of a security in the real property. Thus, the cost of a unit may be adjusted to include any legal fees, brokerage, or margin of any kind. The instrument is preferably configured or adapted so as to be tradable between two parties such that a unit holder is not forced to await the satisfaction of any condition set by the instrument before a profit (or loss) may be realized. Thus, a first investor may buy the instrument for a first price and subsequently sell the same instrument to a second investor for a second price. Typically, the second investor will pay a price that is representative of the value of the underlying real property at the time of sale. If the value of the real property has risen then the first investor achieves a profit. Where the value has decreased, the first investor realises a loss. In the case of a Managed Fund structure, the first investor would acquire units in the Fund and the second investor could also acquire units in the fund without the need for the first investor to sell units to the second. In such a case, the Managed Fund would sell unitsto both investors An instrument created by the present methods may be configured or adapted so as to be tradable by way of private treaty. However, the instrument is preferably configured or adapted to be traded by way of an organized exchange in a manner similar to company equities on a stock exchange. In this way, investors may readily buy and sell an instrument representative of the value of an underlying real property. This allows for low cost, shorter term speculation on the property market in a way that is not achievable with prior art investment methods. Alternatively, investors could buy and sell units in a Managed Fund that has acquired (or is in the process of acquiring) a diversified portfolio of the instrument, each assuming its value from an underlying property asset. Where the real property provides income (or may potentially provide income), the methods may comprise the step of providing a means for distributing income provided by the real property (or at least a proportion of that income) to a holder of the instrument. For a subset of property investors, yield is an important consideration in selecting and/or valuing a property. The value of any distribution will typically be related to the proportion of the property represented by the instrument. In such a method, the provision of a yield value would be in conjunction with the provision of a capital growth value.

The value of the distribution may be determined by reference to actual income, an expected income, an approximate income, a presumed income, or adeemed income.

In one embodiment of the method, the means for distributing income comprises the step of determining a rental yield value for the real property. The rental yield value may be added to (or otherwise incorporated into) the value of the real property when determining the initial price of an instrument for sale to a first generation buyer. When offering an instrument for sale, to a second generation (or subsequent generation buyer) the holder will typically have regard to any rental yield value when determining an offer price for the instrument. Similarly, the second (or subsequent generation buyer) the holder will typically have regard to any rental yield value when determining a bid price for the instrument. In a Managed Fund structure, the rental yield generated from an underlying property asset may be capitalised into the value of the instrument or paid on a periodical basisto the Fund. The rental yield value may be variable, and may be reassessed at regular intervals such as quarterly, half-yearly or yearly based on various market factors.

In one embodiment, the rental yield value is determined by applying a Meld Coefficient Value ( CV) to the value of the real property. The rental yield value may not be explicitly or implicitly referred to as such in the instrument, or in the course of creating or trading the instrument. The rental yield value may be included in any other adjustment, margin, risk value and the like added or incorporated into the value of the real property or an instrument representing the underlying real property. The YCV values are variables and may be set pursuant to current data provided by authorised industry bodies in respective jurisdictions.

The setting of the rental yield value during any designated period may be determined by way of industry guidance and standards. The rental yield value may be determined by reference to any factor(s) that impact (or might potentially impact) on the income generated by a property. Preferably, the actual amount of the rental yield value is expressed as a capitalised amount when the transfer of an instrument is settled, and preferably not by way of ongoing income from the property owner to the retail investor. This arrangement may be applied to a Managed Fund structure where the property owner pays the rental coefficient amount to the Managed Fund pursuant to the terms of the instrument In one embodiment, the rental yield value is determined by applying a Yield Coefficient Value (YCV) to the value of the real property. For example, the YCV for a residential property may be fixed at 3%and for commercial property at 3.5% These values are relative measures that can be used in a forward looking mechanism that incorporates risk and the impact of receipt of income from the underlying property asset to the property owner.

In one embodiment, the step of providing a means for the distribution of income does not alter, affect, override or otherwise undermine the requirement of some forms of the method that require that the instrument does not allow for or obligate the transfer of beneficial ownership or interest or right in the real property. To that end, the income may not be distributed to the instrument holder until the instrument is sold or redeemed. This embodiment is not applicable in a Managed Investment 9ructure.

For example, the method may comprise the step of determining a Capitalised Meld Value (CYV) which is accumulated year by year over the period of instrument ownership. The CW is not distributed as income to a holder of the instrument periodically but rather is capitalised and applied to each instrument settlement price set when it is sold or redeemed. The YCV may be calculated every 12 months for each instrument and may be adjusted on a pro-rata basis for periods of less than 12 months. In some circumstances, the CW is paid periodically, and without negatively impacting the financial status of the investor i.e. in a Managed Fund 9ructure

The CW of an instrument is typically calculated on the annual anniversary purchase date of the instrument (or may be done at 6 monthly intervals) and generally continues to accumulate each year of instrument ownership until it is sold or redeemed. At sale or redemption of the instrument the CW will typically be capitalised into the settlement amount of the instrument and the process then continues on for the next generational owner of the instrument. Reference is made to EExample 2 herein showing a highly preferred form of these methods.

Referring to EExample 2, the CW is not distributed as income to investors since the CW merely provides a relative price measure on a written instrument but a CW value is capitalised into the instrument settlement price over the period in which it is held by an investor. The CW is reflected in the investor price guidance of the instrument ie the CPVu and IPVu for residential or commercial properties by adding each capitalised and accumulated CW value to both the indicative Bid (IPVu) and Offer (CPVu) prices but shall normally exclude periods of less than 12 month for calculation purpose at any time, (the accumulated CW value will only be incorporated into the guidance price set based on the accumulated CW as determined at a 12 month valuation point.

An advantage of methods incorporating a CW is that the residential and commercial property investors considering yields are provided with an opportunity to participate. Furthermore, the retail investor's risk profile is minimized by factoring in a capital amount into the instrument price structure so as to address the impact of a rental income stream received in its entirety by the property owner writing or listing an instrument. In another aspect, the present invention provides an instrument having avalue based on an underlying real property, the instrument configured or adapted to allow for a buyer of the instrument to benefit from an increase in the value of the underlying real property but without obligating or allowing transfer of beneficial ownership, or an equitable interest, or a right in the real property. The instrument may have any of the features discussed supra in reference to the inventive methods, and vice-versa.

Preferably, the value of instrument is based on a fraction of the underlying property. The fraction may be calculated by dividing the value of the underlying property into n units, with the units being preferably equal units. Whether or not the units are equal, n may be selected from the group consisting of 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 , 12, 13, 14, 15, 16, 17, 18, 19, and 20. In certain embodiments of the method n is greater than 20, and may be selected from the group consisting of 21 , 22, 23, 24, 25, 26, 27, 28, 29, 30, 31 , 32, 33, 34, 35, 36, 37, 38, 39, 40, 41 , 42, 43, 44, 45, 46, 47, 48, 49, and 50. In certain embodiments of the method, n is greater than 50, and may be greater than 60, 70, 80, 90, or 100. Some embodiments of the method provide that n is greater than 200, 300, 400, 500, 600, 700, 800, 900 or 1000. The instrument may not allow for or obligate the transfer of beneficial interest or beneficial ownership or right in the real property. The instrument may be a legal instrument and/or a financial instrument and/or a property derivative product.

The instrument may allow a holder of the instrument to benefit from any increase in the value of the real property over the time that the instrument has been held by the buyer.

In a preferred embodiment of the instrument, the instrument is configured or adapted to be tradable. In certain embodiments, the instruments of the present invention (and also the methods used to create the instrument) are distinguished from prior art arrangements such as swaps, call/puts etc. These prior art arrangements typically are 'closed' single party corporate transactions ie one institution hedging an investment with another and trade on an index that is generally supplied by an independent party. Understandably, given the number and value of properties contained in large institutional portfolios, they do not trade on the basis of a specific value of an underlying asset, as is required according to the present invention. The existing arrangements are focused on hedging methods spreading risk through to a second party who is prepared to share that risk with an attached financial benefit. A further distinguishing feature relates to the benefactor spread of such hedging schemes. In the main, hedging is the primary purpose and is actioned by a corporate entity via a contractual arrangement. The only direct benefactors being the corporate entities involved in the transaction. Preferred embodiments of the present invention allow for large numbers of individual retail investors to participate in the property market in a manner that is far removed from the more sophisticated hedging schemes underpinned by various indices. The present invention provides the retail investor with opportunity to invest in the capital growth (or capital growth and rental yield) of a real property asset relative to their financial capacity to do so. This is attractive to retail investors and is simply not provided for in the prior art. In highly preferred embodiment, the instrument is a retail residential property derivative. Such instruments are referred to in the Examples herein as a " Property Equity Rght" or " PER'. A PER is a retail property derivative security that takes its value from the certified price of an underlying real property asset from which the PER is created. It is a contractual right that in consideration of a cash payment, confers to an investor an amount equivalent to a part of the future sale proceeds of the underlying real property asset pursuant to the specific terms of each PER contract. It also delivers to an investor the future economic performance in an obligated amount of equity in an underlying property asset but not the equity itself. The equivalent amount to part of the future sale proceeds provides the benchmark for establishing the investment return to an investor. The PER contract does not assign interest in land, besides the interest in the security. A PER provides an investor with the ability to invest in the capital growth (or the capital growth and rental yield) component of a residential property without the high acquisition, funding and holding costs normally associated with property ownership.

The instrument may be real (for example being embodied in the form of a physical paper certificate), or virtual such as for a computer-based record on a computer-readable medium, such as computer-readable memory. The computer-readable memory is typically non-volatile.

The present methods may be advantageously executed by a computer. This provides the ability to rapidly generate units and ascribe unit values for the creation of the instrument. The ability to automate this process will allow for a seller (or his agent) to efficiently unitize the value of a property based on current market conditions. For example, where the instruments are traded on an exchange, the volume of low value (i.e. highly unitized) instruments may indicate the desire of buyers to purchase instruments based on only highly unitized properties. Accordingly, the seller can meet the market, and sell the instruments in atimely manner. Computer-based methods also provide for the ability to deal with the unitization of many properties in a short amount of time. Operational costs are also minimised, optimising the efficiency in the interconnectivity of the integrated operational business units of an exchange involved in trading the instruments, such as legal, valuation, trustee and technology units. Computer-based methods also allow improved efficiencies by the implementation of preferred Kaizen methodology in regulating the operation of an exchange.

Computer-based methods also facilitate the many ancillary calculations and tracking of documents that are involved in the many embodiments of the present invention. For example, preferred embodiments require the calculation, tracking and recording of yield values on some instruments. Where multiple instruments covering multiple properties are involved, computer-based methods assume some importance in the practical implementation of the present invention.

In a further aspect the present invention provides a computer-readable memory containing processor executable program instructions for creating a unitized security in a real property, the program instructions comprising the steps of: accepting a data input being a total valuation amount of the real property or an obligation value amount, and dividing the total valuation amount or obligation value amount into two or more unit valuation amounts.

In certain embodiments of the computer readable memory, the program instructions solve the equation UV=TV/n, where UV is the unit valuation amount, TV is the total valuation amount, and n is the number of units required.

In certain embodiments of the computer readable memory, the program instructions solve the equation UV=OV/n, where UV is the unit valuation amount, OV is the obligation valuation amount, and n isthe number of units required.

In a further aspect the present invention provides a computer-readable memory containing processor executable program instructions for creating a proportional amount of a real property for the purpose of unitizing a security in a proportion of a real property, the program instructions comprising the steps of : accepting a data input being a total valuation amount of the real property, and multiplying the total valuation amount by a fractional number to provide an obligation value amount. As used herein, the term "fractional number" means any number less than 1 , but greater than zero, and includes a fraction represented as a percentage

In certain embodiments of the computer readable memory, the program instructions solve the equation OV=TV x F where OV is the obligation value amount, TV is the total valuation amount, and F is a fractional number.

The number or units or n may be selected from the group consisting of 2, 3, 4, 5, 6, 7, 8, 9, 10, 1 1 , 12, 13, 14, 15, 16, 17, 18, 19, and 20. In certain embodiments of the computer- readable memory n is greater than 20, and may be selected from the group consisting of 21 , 22, 23, 24, 25, 26, 27, 28, 29, 30, 31 , 32, 33, 34, 35, 36, 37, 38, 39, 40, 41 , 42, 43, 44, 45, 46, 47, 48, 49, and 50. In certain embodiments of the computer-readable memory, n is greater than 50, and may be greater than 60, 70, 80, 90, or 100. Some embodiments of the computer readable memory provide that n is greater than 200, 300, 400, 500, 600, 700, 800, 900 or 1000.

Thus, the present methods provide for a transformation of data in that a first value (the total value of the real property) is divided into multiple units, and in some cases a relatively large number of units, to provide a second value (a unit value) which is in some cases is a relatively small value. There is also provided a transformation of data in that a first value (the total value amount of the real property) is multiplied by a fractional number to provide a second value (the obligation value amount).

The present invention may involve transformation of data in many other respects, and reference made to the many calculations and equations disclosed throughout this description and the following claims.

Such a transformation in data by a machine (such as a computer) provides the significant financial and social advantages discussed elsewhere herein.

The present invention is preferably implemented on a computer-based trading platform, in the same manner or in similar manner to platforms presently used to trade stock on a stock exchange. Accordingly, in afurther aspect the present invention provides a computer-based exchange for the trading of an instrument, the computer comprising program instructions, the program instructions comprising the steps of: accepting a first data input being an offer price for an instrument as described herein, accepting a second data input being a bid price for an instrument as described herein, comparing the offer price and the bid price, and out putting an execution instruction where the offer price equalsthe bid price.

The instruction is configured or adapted to commence a settlement activity required by the exchange such as the generation of correspondence (electronic or paper) to the buyer and/or seller of the instrument, the transfer of funds, the updating of an ownership register, et cetera.

In one embodiment, the exchange is (or is a component of) a global computer network enabling the inter-country trading of instruments from one jurisdiction to another jurisdiction. Thus retail investors are able to invest in regions beyond their country of origin online, at any time. For example, an Australian retail investor is able to invest in a property in China or Spain and settle the trade in a similar manner as if it had been executed in the local jurisdiction. International applications of the present invention are also applicable in a Managed Fund network structure where jurisdictional based Funds are interconnected enabling investors from one member jurisdiction Fund to invest in another jurisdictional Fund in and from another country. The instrument may be adapted or configured to be tradeable on a straight through exchange save for the fact that the Fund acquires the instruments initially and investors buy and sell NAV entry and exit price units in the Fund that are quoted on an exchange platform, such as a national stock exchange.

An exchange of the present invention may create its own index or indices (individual, state and national) by using a stream of current CCV price data received by the exchange from a panel of certified property valuers. As is understood, the transaction of an instrument according to the present invention may carry a risk for the buyer. A risk in such transactions is that the property market declines after purchase of an instrument. Therefore, a PER guidance price range for a straight through trading platform includes an indicative bid (the price at which an investor will try to purchase, in the knowledge that it includes a risk discount) and an indicative offer (the price at which a property owner will try to sell) may be provided by an exchange.

In a preferred embodiment of the exchange, the exchange may provide indicative bid and offer prices for a unit (and accordingly an instrument representing a unit) according to the following equations:

(TVx F)/n, where UVi is a unit valuation amount representing an indicative offer price, TV is the total valuation amount, F is a fractional number and n is the number of units required; and UV₂=(OV - (OV x AMR))/n, where UV₂ is a unit valuation amount representing an indicative bid price, OV is the obligation valuation amount, AMR is the applied market risk and n isthe number of units required.

Typically, UVi is the indicative offer price for a straight through trading exchange and represents a collective or aggregated (all of the PERs) entry price for a Managed Investment Fund (i.e. NAV unit entry price). Similarly, UV₂ is typically the indicative bid price for a straight through trading exchange and the exit price for a Managed Investment Fund ie NAV unit exit price (aggregation price of all PERs).

The value of the AMR may be a percentage or a fraction that is arrived at by taking one or more factors into account. T e factors are typically related to the risk that a property will not achieve capital growth (or indeed may achieve a capital loss), thereby adjusting the value of the instrument negatively. One factor impacting on the AMR may be the location of the property. A property that is proximal to a city centre may provide for a lower AMR given that such properties historically perform better in terms of capital growth than those in outer suburban areas. Other geographically-related factors include post code (zip code), proximity to amenities (such as parks, schools and public transport), and proximity to undesirable features (such as main roads, factories and car parking complexes). In a Managed Fund 9ructure, the AMR may be factored into the UV₂ indicative price (risk rated) and may also include transaction costs incurred by investors. The UV₂ price may be less than the UN price. For example, the Entry Unit Rice may be $25.00 while the Exit Unit F ice is $24.75.

The Entry price quoted for a Fund managing a portfolio of the instruments may be calculated on the aggregated net market value of each instrument in the Fund and the exit price may be the aggregated net market value with the AM Rvalue applied. Both entry and exit prices may be fixed and may change as the NAV changes with new instrument valuations.

Another factor that may influence the AMR is the type of real property. For example, apartments are generally viewed as a more risky investment given that prices can drop significantly where there are a number of apartments concurrently for sale in a block, or if the recent sale price of comparable apartment in the same block is low.

The AM R may be greater t nan 0% or less t nan 100% Preferably t he AM R is less t nan about 50% 45% 40% 35% 30% 25% 20% 15% 10% or 5% The skilled artisan having a knowledge of a given property market is able to arrive at an AMR suitable for pricing in a discount to a unit valuation amount that is generally reflective of the risk involved in purchasing an instrument representing a unit.

As mentioned supra, the AMR may be adjusted according to the yield (real or otherwise) of the real property.

In practice, the straight through inputted bid and offer prices submitted by investors on an exchange may be influenced by one or many macro and/ or micro economic conditions. For example, when the outlook for the property market is positive, an instrument is more likely to trade at or above the indicative offer price. Conversely, when a market is negative, the instrument may trade closer (or even at a discount) to the indicative bid price. An advantage of such embodiments is to provide for greater market transparency, giving investors greater confidence in entering the property market, and assisting them to make more informed decisions Furthermore, such embodiments may also satisfy certain regulatory authorities charged with the issuance and renewal of licenses required for dealing in instruments. Thus, the UVi and UV₂ unit valuation amounts represent price values that provide investors with price guidance to an indicative bid and offer price range of the instrument.

Accordingly, in a further aspect the present invention provides a method for setting an indicative bid price for a unitized security in a real property, the program instructions comprising the steps of: accepting a data input being a total valuation amount of the real property or an obligation value amount, and discounting the total valuation amount or obligation value amount by an amount relative to a perceived risk or a real risk that the real property will achieve zero or negative capital growth over an investment period. Yet another aspect of the present invention provides a computer-readable memory containing processor executable program instruct ions for setting an indicative bid price for a unitized security in a real property, the program instructions comprising the steps of: accepting a data input being a total valuation amount of the real property or an obligation value amount, and discounting the total valuation amount or obligation value amount by an amount relative to a perceived risk or a real risk that the real property will achieve zero or negative capital growth over an investment period.

In certain embodiments of the computer readable memory, the program instructions solve the equation

(TV x F)/n, where UVi is a unit valuation amount representing an indicative offer price, TV is the total valuation amount, F is a fractional number and n is the number of units required; or UV₂=(OV - (OV x AMF^)/n, where UV₂ is a unit valuation amount representing an indicative bid price, OV is the obligation valuation amount, AMR is the applied market risk and n isthe number of units required. The number or units or n may be selected from the group consisting of 2, 3, 4, 5, 6, 7, 8, 9, 10, 1 1 , 12, 13, 14, 15, 16, 17, 18, 19, and 20. In certain embodiments of the computer- readable memory n is greater than 20, and may be selected from the group consisting of 21 , 22, 23, 24, 25, 26, 27, 28, 29, 30, 31 , 32, 33, 34, 35, 36, 37, 38, 39, 40, 41 , 42, 43, 44, 45, 46, 47, 48, 49, and 50. In certain embodiments of the computer-readable memory, n is greater than 50, and may be greater than 60, 70, 80, 90, or 100. Some embodiments of the computer readable memory provide that n is greater than 200, 300, 400, 500, 600, 700, 800, 900 or 1000.

Thus, the present invention provides for the transformation of data in that a first value (the total value of the real property or the obligation value) is transformed into a second value: UVi and/or UV₂. Such a transformation in data by a machine (such as a computer) provides the significant financial and social advantages discussed elsewhere herein.

It is appreciated that any of the various calculations, equations, manipulations or transformation of data disclosed herein may be accomplished by the use of computer or a computer readable memory, or may involve the transformation of a first value into a second value. The computer readable memories and transformations explicitly referred to supra have been for the purposes of generally describing these aspects of the invention.

In a preferred embodiment, the computer-based exchange is a straight through exchange. The skilled person is familiar with such exchanges that allow for real time trading. That is, a trade is executed immediately that a bid price matches an offer price.

Many stock exchanges (such as NY¾ AS^ NASDAQ, and USEE) offer straight through trading platforms, and the skilled artisan is amply enabled to embody the present invention in a similar manner.

In a preferred embodiment, the computer-based exchange is configured or adapted so that a transaction between a buyer and seller remains visible for a time period. The time period may be any time, but is preferably at least about 1 , 2, 3, 4, 5, 6 or 7 days. An advantage of a straight through trading platform is that the continuity of the trade is maintained after a first generation transaction has been executed. The process provides a method by which the transacted price field is duplicated following a first generation transaction which allows the transacted price field ('SOLD, Pending Settlement') to remain listed during the settlement period (for example 7 days), after which time the transacted unit and price field is removed from the exchange and all details archived. In the event of failure to settle, the transacted price field would still be removed from the exchange display but would proceed into a separate offline legal collection process. Before the instrument is redeemed (for example paid out when the underlying property asset is sold), it may be transacted many times Each executed transaction represents a generational sale as foil ows-

First sale - Generation 1 -> Second sale - Generation 2 etc

An investor who is registered and logged onto the exchange can submit preferred bid and offer prices for an instrument at any time. Once a bid and offer price match occurs on the exchange, the instrument is transacted and remains listed on the exchange during the T+7 day settlement period. The transacted price field displays a red band with a ' SOLD - Pending Settlement' notice. The transacted price field either single line or multi line (multiple lines if more than one unit is sold in the transaction) will remain in that transacted form until final settlement has been concluded (after a period of T+7days). Reference is made to Figure 11. As used herein, the term "computer-based" is intended to mean that the exchange is operable at least in part or even entirely on any processor-equipped device such as a personal computer, laptop, netbook, tablet, PDA, smart phone and other similar contrivances. The method may be implemented on a single computer or across multiple computers connected to a LAN, WAN or the Internet. The method may be implemented in the form of standalone software adapted to be installed on a single computer.

Preferably the method is embodied without the need to install dedicated software or database information on the user's computer. For example, the entire method may be embodied in aserver remote form the user's computer, with data transmission between the computer and server being via the Internet, by way of a browser platform such as Microsoft Internet Explorer™ Google Chrome™ Mozilla Rrefox™ or Apple Safari™ Indeed, an Internet -based implementation is preferred since the database information is kept up-to- date on a single server such that any modifications are immediately accessible to all users.

Those of skill in the art will appreciate that the various embodiments disclosed herein can be implemented as electronic hardware, computer software, or combinations of both.

To clearly illustrate this interchangeability of hardware and software, various illustrative components and steps of the method have been described above generally in terms of their functionality. Whether such functionality is implemented as hardware or software depends upon the particular application and design constraints imposed on the overall system. Skilled persons can implement the described functionality in varying ways for each particular application, but such implementation decisions should not be interpreted as causing a departure from the scope of the invention. In addition, the grouping of functions is for ease of description.

The various embodiments disclosed herein can be implemented or performed with a general purpose processor, a digital signal processor (DSP), an application specific integrated circuit (ASQ, a field programmable gate array (FPGA) or other programmable logic device, discrete gate or transistor logic, discrete hardware components, or any combination thereof designed to perform the functions described herein. A general-purpose processor can be a microprocessor, but in the alternative, the processor can be any processor, controller, microcont roller, or state machine. A processor can also be implemented as a combination of computing devices, for example, a combination of a DSP and a microprocessor, a plurality of microprocessors, one or more microprocessors in conjunction with a DSP core, or any other such configuration.

The steps of any method or algorithm described herein can be embodied directly in hardware, in a software module executed by a processor, or in a combination of the two. A software module can reside in RAM memory, flash memory, ROM memory, EPROM memory, EEPROM memory, registers, hard disk, a removable disk, a CD-ROM, or any other form of storage medium. An exemplary storage medium can be coupled to the processor such that the processor can read information from, and write information to, the storage medium. In the alternative, the storage medium can be integral to the processor. The processor and the storage medium can reside in an application specific integrated circuit (ASQ. Various embodiments may also be implemented primarily in hardware using, for example, components such as ASCs, or field programmable gate arrays (" FPGAs"). Implementation of a hardware state machine capable of performing the functions described herein will also be apparent to those skilled in the relevant art. Various embodiments may also be implemented using a combination of both hardware and software.

The present invention will now be more fully described by reference to the following non- limiting .Examples.

EXAMPLE1 : Unitization of a real property, creation of instrument, and trade of the instrument on an exchange.

The following glossary is provided to assist in the understanding of this EExample.

SOUP process is the overarching process, referring to the PEER security origination and unitization process Property [Equity [Exchange (petEx)- is a special purpose property exchange platform that enables registered investors to 'straight through' trade an instrument, more specifically a property derivative product called a Property EEquity Rght (PEER).

Property [Equity Rght (PtER)- is a type of instrument, being a contractual right that confers to an investor an amount equivalent to an obligatory part of the future sale proceeds of the underlying real property asset pursuant to the specific terms of a PEER contract. The obligatory part of the future sale proceeds may be defined by reference to the ORV (see infra). A PEER may be considered a contractual right to the future economic performance in an obligated amount of equity determined by the property owner. The economic performance may include both capital growth and rental yields. PERg-plus - isa PERdirected to capital growth only, or predominantly to capital growth

PER g+r - is a PEER directed to a combination of capital growth and rental coefficient yield only, or predominantly to a combination of capital growth and rental coefficient yield.

Current Certified Valuation (CCV) - is the independent certified valuation executed on each underlying residential (real) property asset used to create the property derivative product (PER).

Obligation Reference Value (ORV) - is the amount of equity (expressed as %) to the future economic performance conferred to an investor in contract or a part of the future sale proceeds of a residential property that is obligated in a PER contract to which a property owner agrees to allocate as an equivalent amount to an investor in the investment return i.e. 0 to 100% at redemption date. The contract amount of the ORV may be risk adjusted in some instruments by multiplying the ORV by a fractional value (for example, between 1 and 10). This fractional value is called the Investor Equity Value (IEV) and the methodology is deployed to address the risk carry of the PER transact ion. The redemption date being that date when the residential property is sold, the property owner dies or the property owner buys back the PER on the online Exchange.

Investor [Equity Value (IB ) - The IEV is an adjustment ratio that is used for both product types i.e. capital growth only (PERg-plus) and capital growth plus rental yield (PERg+r). In the case of the capital growth only product, the amount of obligated equity in contract (ORV) will be adjusted using an IEV ratio of 1 : 1.25. This means that if the ORV is initially set at 10% the IEV adjusted amount in contract would be 1.25 X 10%= 12.5% In the case of the capital growth plus rental yield product, the adjusted ORV is based on an IEV ratio of 1 :1. This means that if the ORV is initially set at 10% the IEV adjusted amount in contract would be 1 x 10%= 10% (unaltered) for this product. The reason for doing this is to take into consideration the risk averse nature of each product type. 3nce the rental coefficient is a fixed yield amount, it removes some of the investor risk. If however the investor is relying on capital growth, the inaeased risk profile of this product means that the investor receives more equity in the contract (12.5% in the example used above). Hence, the IEV is the risk adjustment value or ratio used to determine the amount of equity defined in the PER contract (the ORV). Applied Market Rsk (AMR) - is a market risk variable used in the calculation of the Indicative PER Value, the PER price that reflects investor market risk in the transaction and applied to a PER based on the postcode of an underlying property, or based on the property type.

Certified PIER Value (CPV) - is the certified value of the PER based on the CC and the ORV and is provided to investors in a PER price spread (including the IPV) as a guidance only to the fair upper range val ue of a PER CPV=CC x ORV.

Indicative PEER Value (IPV) - is the risk evaluated CPV value using the AMR (for example, post code based on, say, 1% to 10%) and is provided to investors in a PER price spread(including the CPV) as a guidance only to the fair lower range value of a PER IPV=CPV -(CPV x AMR).

Certified PEER Value unitised (CPVu)- this is the Certfied PER Value unitised into smaller value units, usually 100 units but can be any number where normally, 0>n<1000 where n= the number of units in a PERprice matrix but is not limited on the upside value of n.

Indicative PEER Value unitised (IPVu)- this is the Indicative PER Value unitised into smaller value units, usually 100 units but can be any number where normally 0>n<1000 where n= the number of units in a PERprice matrix but is not limited on the upside value of n.

PEERIndex Matrix (PIM) - this is the primary PER index displayed to provide investors with a performance indicator for each PER unit listed on peEx and calculated by using each new and current CCV price data element inputted into the peEx database periodically.

PEER Price Matrix (PPM) -This is the price structure displaying all the smaller value PERunits (normally 100 units per PER) and their individual price fields created by the SOUP Process, calculating both the CPV and IPV price values each time certified price data is inputted into the peEx database at 6 monthly intervalsor other.

PEER Unitisation Number (PUN) - This is the representative number "n" of small value units that a PER is divided into. This is used in the Process to unitise a PER investment unit into smaller value units formatted in a PER price matrix. Generally, one PER investment unit is unitised into x 100 smaller value units i.e. PUN=n=100.

PEER Unit Price field - each smaller value PERunit will have its own price field consisting of a BID and OFFER price and three depth lines. The first line of bid and offer prices can be expanded to show an additional two lines of price depth.

PEER Reference Number (PRN)- an encrypted number that identifies all the details relating to both the PER and the underlying property asset used to create the PER This identification number also accesses PER details relating to a property owner, PER owner, specific property, mortgage, trust deed, PER contract etc.

The SOUP process initially captures four key data elements from the peEx database following the manual entry of a PER Reference Number (PRN)-:

1. Obligation Reference Value (hereinafter called the 'ORV')^'

2. Certified Current Valuation (hereinafter called 'CCV) of the underlying property asset

3. Applied Market Rsk Value (hereinafter called "AM R') which is based on the postcode or type of each property that is used to create a PER

4. The PER Unitisation Number (hereinafter called 'PUN').

The SOUP process incorporates these data elements in a series of algorithms to calculate

4 5

both the Certified and Indicative PER Values. These PER price values shall nominally represent guidance for investors prior to open market trading when investors may voluntarily submit bid and offer prices for PER units listed on peEx. The Certified and Indicative PER Values are then used in the SOUP unitisation algorithm which enables a PER to be automatically unitised into smaller value units and automatically displayed in a PER price matrix. For example in a PERg-plus product, where the ORV is 8% and risk adjusted by multiplying the ORV by an IB/ value of 1.25 (risk carry) resulting in a ORV contract value of 10% the CCV of a property is $1 ,000,000, the AMR=10% the Certified PEER Value would be $100,000 and the Indicative PEER Value would be $90,000. If the PUN=100, the PEER price matrix would display 100 equal PEER unit price fields (for investors to submit offer/bids into) with all PEER units linked to a nominal BID Price indicator =$900 and a nominal OFFER Price Indicator = $1000. Pursuant to free market principles and a straight through trading platform, investors would be free to submit bid or offer prices for each individual PEER price field as they deemed appropriate. (See Rg 1 ).

Conversely, in a Managed Investment structure, the contracting between the property owner (originates a PEER) would be completed by the Fund Manager and investors would then be able to buy and sell units in the fund based on fixed entry (Offer) and exit (Bd) unit prices. The notion of a fixed price means that the NAV value of all the PEERs in the Fund will change at some regular interval such as monthly, quarterly, or half yearly based on the inputed certified valuations of each underlying property asset used to create the PEER securities. One hundred (100) of these smaller value PEER units would equal one (1 ) whole PEER If an investor could only afford to invest say, $5000, they could buy 5 smaller value units in the PEER price matrix representing 5% of the whole PEER If a superannuation company wanted to buy the whole PEER it could transact all 100 smaller value units (at a cost of say $1 ,000) in the price matrix and so on. The PUN in this example would be 100. i.e. PUN=100 but in reality, the PUN value could be any number providing the minimum value of each smaller PEER unit was not less than $500. Therefore, the PUN can vary or it may be fixed so the whole system could become standardised i.e. a fixed PUN for all listed PEERS on peEEx. Conversely, each individual PEER matrix may have its own PUN but a minimum cap value would apply restricting each smaller PEER smaller value unit's value to a minimum of A$500 i.e. CPVunitised value > $500⁷. The SOUP Process is activated following the input of a PRN (PEER Reference Number) by the authorised operator into the SDUPcomputer console. This commences an automatic search for the relevant PEER data elements stored in the peEEx database that are used in a series of algorithms to originate, unitise and set each PEER price matrix that would be represented in this instance by 100 individual price fields

i.e. PUN=100 -:

ORV CCV PUN AMR

Details of the PEER the underlying property asset and specific owner identity data are also

8 9

captured by the SOUP Process for cross referencing with each PRN and UIN from the peEEx database and then a series of related SOUP algorithms automatically calculate the PEERunit price spread i.e. the CPV and IPV, displaying the PEER price matrix (reflecting the designated number of smaller value PEER units and their individual price fields) that can be traded by retail investors on peEEx. The seriesof SOUP algorithms used to originate and unitise each PEER matrix are-:

1. Certified PEER Value (CPV) = (CCV x ORV)

2. Certified PEERValue (unitised) =(CPV)/ n

3. Indicative PEERValue (IPV) =(CPV) - (AM Rx CPV)

4. Indicative PEERValue (unitised) =(IPV)/n Where-:

CCV = Certified Current Valuation

ORV = Obligation Reference Value

AMR = Applied Market Rsk =10 or 15% n=PUN = the PER Unit Number or total number of smaller units making up a PERmatrix

Reference is now made to Rg 2, in which:

1. Independent peEx business units input a variety of related PER data into the database in prescribed formats using system generated PRN and UIN numbers as system cross references.

2. The SOUP automatically scans the peEx database using the PRN for each PER extracting key data and information for the purpose of originating, unitising and setting up the PER price matrix in readiness for the PER listing on the peExchange.

3. Authorised entity/person using security protocol inputs PRN into SDUPconsole.

4. The SOUP searches key PER database and automatically configures the PER price matrix in pre listing format for listing on peEx.

5. Auditors, accountants and the Trustee will have the authority to security access the database for audits and reporting processes.

6. The SDUPautomatically lists the PERprice matrix on peEx for open, free trade.

Reference is now made to Rg 3, which demonstrates specific SDUPalgorithm calculations: Assume CCV= $1 m, ORV=10% PUN= 100, AM R= 10%(ORV x I EV =10%where I EV=1 )

1. Certified PER Value = CCVx ORV

(CPV) = 1 ,000,000 x 10/100

= 100,000

2. Certified PER Value =(CCVx ORV) /PUN

(unitised) =(1 ,000,000 x 10/100)/ 100

=100,000/100 =1000

3. Indicative PEERValue = CPV- (CPVx AMR)

(IPV) =100,000 - (100,000 x 10/100)

=100,000- 10,000

= 90,000

4. Indicative PEERValue = IPV/ PUN

(unitised) = 90000/100

= 900

Reference is now made to Rg 4.

Summary of SOUP Process flow

9ep 1 : A property owner submits an application to list a PE property derivative product and this application is received and processed by the peEEx legal verification unit. All the application data is uploaded to the peEEx database and PPM and UIN numbers are generated for each PEER the underlying property, the property owner and investor (where applicable).

Step2: A PPM isentered into the SOUPconsole resulting in the

automatic extraction of the CCV, ORV, AM Rand PUN values from peEEx database, cross referencing and confirming all data with both the property asset and property owner details using the PPM (and the UIN where applicable).

9ep3: The SOUP algorithms automatically calculate the Certified and Indicative PEERValuesfor the pre listed PEER investment unit.

9ep5: The SOUP algorithms then calculate the unitised

Certified and Indicative PEER Values and automatically sets the PEERprice matrix (See Rg 1 b) using the PUN i.e. a PER matrix unitised into a specified number of smaller value units where PUN = n and 0 > n <1000

Each of the 100 smaller value PERunits have their own

price fields but all 100 units is subject to t he same Investor

Price Guidance set of CPV and IPVvalues.

9ep6: SOUPthen inputsthe Certified PER Value into the

PER Index data field for the creation and publishing online of a basket of individual, state and national PER Indices

Once a PER price matrix has been established on peEx (following verification and legal approval) say, based on PUN= 100, registered peEx retail investors can then 'straight through' submit real time bid and offer prices on peEx (buy/ sell) for each of the 100 listed smaller value PER units. Each price field will have depth lines that are displayed and expanded. The PERindices is used to assist retail investors monitor the performance of their PER investments and all the peEx indices is maintained by an ongoing input of Current Certified Prices periodically (half yearly). The CCV price updates is inputted by independent property valuation groupsthat make up the peEx valuation panel.

The Certified PER Value (CPV) is calculated using the Certified Current Valuation of the underlying property asset and multiplying this value by the ERV value.

!. CPV = CCV x ORV where CCV= $1 m ORV =10%where I EV=1

CPV = $1 ,000,000 x 10/ 100

= $100,000

CPV (unitised) = $100,000/100 where PUN= 100

= $1000

A series of inputted Certified PER Values shall constitute a PER index (and provide a guidance to investors as to the fair and risk PERpricesfor each listed PER at any given time). Free and open market principles shall apply in the PER market so investors is free to submit whatever bid and offer prices they deem appropriate. The unitised Certified PER Value will generally be the price that a property owner is endeavouring to sell the PER unit i.e. OFFER (but this is influenced by market conditions) and the unitised Indicative PER Value (risk discounted) will generally be the price level at which investors is attempting to buy the PER unit i.e. BID (but this is influenced by market conditions). Reference is made to Rg. 5.

The PER Index

There is three individual PER indexes published on peEx and all three will use the Certified Price data inputted to the peEx database every 6 months¹⁰ -:

1. An individual index for each PER (location and property price)

2. A consolidated state based index incorporating all the PER certified prices in each state (all properties in a particular state)

3. A national index combining all residential certified prices received by peEx from all the states in Australia peEx will establish its own market indices based on externally inputted PER Certified Value data. Before listing a PER a CCV is executed for each underlying property asset that supports the PERIisting and thereafter, price updates is submitted at 6 monthly intervals for each listed PER This means that a price index is created for individual PERS as well as consolidated indexes combining all Certified PER Values for both 9ate and National markets enabling investorsto target underperforming or outperforming states or areas.

1. Individual PER Index O / OJ PB=I Certified Time Pffllndex Indicator

1.00m 100000 0 (listed) 0 na

1.03m 120000 6 +2.0 +

1.04m 130000 12 +1.4 +

1.02m 120000 18 - 1.6 -

1.07m 170000 24 +5.4 + 2. Slate Index -will include all the individual PER Indexes in a state

3. National Index- will include an average of all the state PERindexes

of peEx utilising the proprietary SOUP Process consisting of a suite of

software, algorithms, applications and processes. Property owners and

investors is able to access peEx from remote computer ports for

the purpose of trading PER3and/or accessing relevant market

information. There is three different PER indexes created that is based either on the CCVor the PER Certified Price-:

1. An individual index for each PERIisted (code T)

2. A consolidated state index incorporating the PERpricesfor each state (code 'S) (V,N,Q,$W,T,N)

3. A national index combining all residential prices in all states (code 'N')

Examples are shown in Rgs 6 and 7.

As is appreciated from the foregoing, peEx is a special purpose online exchange that enables the generic trading (broad based investor pool) of residential property derivatives (PEERS . Residential property has historically returned the highest capital growth yields for investors but the high acquisition, funding and holding costs have tended to negate the longer term net growth yields. A PER will provide investors (including retail investors, superannuation funds [including self-managed] that do not gear investments) with a compelling investment value proposition. Essentially, peEx is a non-bank, non-debt model that enables property owners/ purchasers to access debt free cash from a residential property and retail investors to directly invest in the capital growth component of residential property markets without the high acquisition /carried costs and from a low cost base.

The primary issue that currently exists for the property derivative market is liquidity. The high unit cost of the underlying asset will in most instances, translate into a higher than usual cost of the property derivative security as compared to, for example, shares traded on a stock market where the unitisation of the primary asset creates a lower unit cost for each of the tradeable share parcels.

This means that so many more individuals is able to participate in that particular type of investment since it offers accessibility to investors from a far lower cost base. As a general rule of thumb, when the unit cost rises for an investment unit, the number of generic retail investors electing or able to access that investment product is likely to proportionately decrease. Therefore a primary objective for peEEx was to create liquidity and this has been achieved by the implementation of the SOUP origination and unitising¹ process where each listed PEER investment unit is originated from a certified value of an underlying property asset (either a valuation amount or an obligation amount) and divided into smaller value units. This means that if a PEER carried a certified value of say, $100,000 , the PEERunit could be unitised into say, 100 smaller value units with a single unit value in this example of $1000, thereby enabling a far greater price spread and enabling more investors to potentially access and participate in the PEER investment opportunity. This would create for the first time a direct investment platform in the capital growth component of residential property via a unitised security rather than in a fixed property asset. In order to enable a broad and diverse number of investors to participate in the unique investment regime of a PEER it was necessary to integrate a proprietary way of originating and unitising the price settingsl of each PEER unit that would enable many more individual investors to participate at a lower price level.

The PIER Differentiator

In equity markets, a company would normally be capitalised by dividing its authorised capital into many individual smaller units (shares) that investors could free trade on a stock market. EEssentially, they purchase an equitable interest in the company i.e. the physical asset. Similarly, if a property had 20 shareholders, each investor would own 5% of the equity in the physical property asset and potentially receive 5% of any income generated from that property asset. In the case of a PER investment unit, investors do not acquire an interest or right in land. Instead, they acquire an interest in a security that confers to them a contractual right to a part of the future economic performance or sale proceeds of the underlying property asset based on the ORV of the CCV at the time of sale of the property asset. The certified value of the PER may be higher or lower depending on which way the market moves during the investment period. Investors by transacting a PERare effectively investing in the direction of a residential property market.

Property derivative securities such as a PER have not been previously unitised in the way that is being proposed. When a PER is uniquely originated and unitised through the SOUP computer related proprietary methodology, PER units can be actively traded on an online, straight through trading platform where investors can directly and freely input their own bid and offer prices. peEx is supported by a protected database and storage facility that will securely house a range of inputted peEx data relating to the identity of the underlying property, property owners and investors, Current Certified Valuations, price updates, PER data including ORV, Certified, Indicative Prices, AM R mortgage details, PER contracts, trust deeds, unit holder statements, Deed of Priority etc. peEx is an online straight through trading exchange that supports a network of individual PER price matrices that enable investors to trade lower cost PER units from a lower cost base. Before a PER matrix can be originated, unitised and listed on peEx, certain external data must be inputted through a prescribed means by contracted professional service operators and then extracted by the SOUP Process.

This data includes -: a) Certified Current Valuation of a property used to list a PER

b) The ORV that is provided in an application lodged by the property owner. The ORV submitted by a property owner is risk rated (from an Investors perspective) causing it to be multiplied by a fractional number termed the IEV which is between 1 and 10. For example, if an ORV submitted in an application is 10% an IEV set at 1.25 is applied to the ORV value resulting in an ORV of 12.5% This adjusted ORV value is used in the PER contract. The I EV is a variable and takes into consideration economic conditions and risk distribution at the time the contract is executed,

c) The PEPi Unitisation Number (PUN indicating the number of smaller value PER units that is created for each listed PER

d) AM Rvalue allocated for each underlying property asset based on postcode

SOUP uses a series of algorithms that automatically extract the relevant data and then calculates a number of benchmark values including -: a) Unitised Certified PER Value and matrix spread

b) Unitised Indicative PER Value and matrix spread The PER prices and AMR figures (based on post code location and type of the underlying property asset) are automatically formatted into the PER price matrix and then unitised. In the saeen shot shown in Rg 8 all the relevant data is displayed in the PER price matrix showing a transaction of 5 PERunits at $2000 per PERunit where PUN =100. The 5 PERunits sold are then removed from the matrix after the T+7 days settlement period or whatever settlement period is applicable and replaced by 5 identical PER units to support ongoing and continuous trading.

Summary

The SOUP Process is a computer related apparatus or methodology that is based on a series of system algorithms used to originate and unitise each PER investment unit in a particular format that relates specifically to a property derivative based security product.

9ep 1

A PPM is manually inputted into the SOUP (software based) and extractsthe following data elements for each PER and related property-: a) CCV

b) ORV

c) AMR

d) PUN 9ep 2

The SOUP uses algorithm Cto calculate the Certified PEER Value (CPV) asfollows-:

CPV = CCVx ORV/ 100

9ep 3 The SOUP uses algorithm I to calculate the Indicative PEER Value asfollows-: I PV = CPV - (CPV x AM R 100) 9ep 4

The SOUP uses algorithm C2 to calculate the unitised Certified PEER Value and instantly arranges all the smaller CPV unitised investment units in the presaibed PEER price matrix as follows-:

CPVunitised = CPV/PUN

9ep 5

The SOUP uses algorithm I2 to calculate the unitised Indicative PEER Value and instantly arranges all the smaller IPV unitised investment units in the presaibed PEER price matrix as follows-:

IPVunitised = IPV/PUN

The series of SOUP algorithms enable all the relevant price data to be expressed in a PEER Price matrix as shown in Rg 9

9ep 6 The SOUP extracts each CPV value for a PEERunit (submitted at 6 monthly intervals) from the peEEx database and inputs these CPV values into a PEER Index Matrix (PIM) which calculates the PEER performance index.

EExample of SOUP calculations

Where CCV = $1.1 m, ORV =10, where I EEV=1 , AM R=10, PUN=100 9ep 1 A PPM is inputted into the peEEx database and extractsthe following data elements for each PEER investment unit: CCV, ORV,AMRPUN for calculation in a series of algorithms 9ep 2 CPV = CCV x ORV =1 ,100,000 x 10/100

=1 10,000

9ep 3 IPV = CPV - (CPV x AMP 100)

= 110,000 - (110,000 X 10/ 100) = 110,000 - 1 1 ,000 99,000

9ep 4 CPV = CPV/ PUN (unitised) = 1 10,000/100 1100

9ep 5 IPV IPV/ PUN (unitised) 99,000/100 990

Reference is now made to Rg 10.

The 'Continuous .Execution Process' (herein called 'CEEP) defines a proprietary computer based methodology that is important in maintaining the continuity of PEERunit trade after a first generation transaction has been executed on peEEx. The process provides a method by which the transacted PEER price field is duplicated following a first generation PEER transaction which allows the transacted PEER price field ('SOLD, Pending Settlement') to remain listed on peEEx during the PEER settlement period ie T+7 days after which time the transacted PER is removed from the exchange and all details archived. Before a PER is redeemed (ie paid out when the underlying property asset is sold), it may be transacted many times. Each executed PERtransaction represents a generation sale as follows-: Rrst PER sale - Generationl -> Second PER sale - Generation 2 etc

PER investors once registered and logged onto peEx can submit bid and offer prices for a PERunit at any time. Once a bid and offer price match occurs on peEx, the PER is transacted and shall remain listed on peEx during the T+7 day settlement period. The transacted PER unit price field will display a red band with a 'SOLD - Pending Settlement' notice. The transacted PER price field either single line or multi line^* (multiple lines if more than one PER smaller value unit is sold in the transaction) will remain in that transacted form until final settlement has been concluded (after a period of T+7days). ^* Each PER is made up of x 100 smaller value units

A duplicate PER unit price field for the same PER (second generation) as the one transacted (first generation) will automatically be originated with a new price field (containing no bid and offer prices) enabling the continuous trading to occur with investors eventually submitting bid and offer prices into the new second generation PERprice field. This process continues for each generation of transactions until the PER is finally redeemed when the underlying property asset is sold.

RDllowing expiration of the T+7 settlement period of the first generation PER the sold or transacted PER price field shall be removed from the peEx price matrix and all the data relating to this transacted PERshall be filed in the PERarchival section of the peEx database and displayed to investors in historical data, PERprice tables, yield and growth graphs.

Rg 11 shows a sequence of screen shots illustrating the CEP process following a first generation PERunit transaction.

It should be noted that all key PER data is listed in a matrix format including PER code, AMR ORV, CCV, CPV, IPV, Indices, Bid, Offer, Status, Transaction Price. A PERis unitised and listed as 100 smaller value PER units, each unit having its own independent price field. The PER unit price fields is dependent on investor activity, time and availability. A PER unit is transacted generationally. The first transaction in a PER investment series is called the first generation transaction. The second transaction is called the second generation transaction etc. But it is the same PER with different owners and strike prices. PR1 is a link in the matrix to the underlying property asset profile that has been used to create the PER Series ie 100 individual smaller value units. This underlying property asset profile will contain-: A full description, location of the property, features, images, links to statistics, historical growth curves, data and indices etc. It will not contain the specific details of the property owner or the specific address i.e. street number of the property pursuant to any privacy laws.

The sequence of screen shots shown in Rg 12 illustrates the CEP process in the multi PER unit transaction of 5 units ie PR 1-5. The first generation of PER units (PR 1-5) are removed from the PER price matrix after the T+7 days settlement period and replaced by an identical duplicate set of price fields for the second generation PR1-5 units. The IPVu and CPVu values shall remain the same until new and current CCV data is inputted into peEx. The IPVu and CPVu prices provide a guidance only for investors and will not in any way impact the free market process of investors inputting whatever prices they choose. EXAMPLE 2: Method incorporating yield adjustment.

This Example relates broadly to the methods disclosed in Example 1 , with the addition step of the incorporation of ayield adjustment.

The first year of afully unitised CW (CYV1) of a PERis calculated asfollows-:

CW1 =the Capitalised Meld Value in year 1 ,

CCV= Certified Current Value =$1 m,

ORV= Obligation Reference Value =20% where IEV=1

\CV = Meld Coefficient Value =3% (maybe any %from 0-100 where 0 would equal a nil °/<yield and 100 would equal a 100% yield)

N = number of units in a PER ie100 in this example C 1 = {(CCVx ORV) x YCV}/N

= {(1 m x 20/100) x 3/ 100}/N

= {200,000 x 3/100}/ N

= 6000/N

= 6000/ 100

= 60

For an investor who owns 20 units of a PER listed on peEX, the total accumulative investment value for the CW after year 1 of ownership (CW1) is:

CW1 = 20 x 60

= $1200

This amount represents the capitalised yield value after the first year of PER ownership. This calculation is system-executed by the SOUP Process for every PER listed on peEx on the annual anniversary date of the purchase of the PERon peEx.

The calculated CW value each year is automatically logged against the owners name and PER details stored in the peEx database. The capitalised CW value for each PERwritten from an underlying investment property would also be reflected in the price guidance set that is displayed to all retail investors ie IPVu and CPVu on the Exchange or alternatively under special circumstances (for example in the context of a Managed Rjnd Slructure) be directly paid by the property owner to the Rjnd periodically. Using the example above for an instrument written from an investment property

YeaM IPVu CPVu

Normal 2000 2100

Capitalised CW (after year 1 ) 60 60

Adjusted Indicative 2060 2160

The IPVu and CPVu prices are indicative and provide a fair value guidance for investors but free market principles shall apply and therefore investors is free to submit their own preferred prices for both bid and offers as a function of the market and economic conditions at the time.

The CW values for a PER after each year of ownership will continue to accumulate and eventually be capitalised in the value of the PERunit when it is sold on peEx or redeemed, ie Accumulative CW1-q = CW1 +CW2 + CYV3 + CW4 + CYVq where q equals the year in which the PER is sold or redeemed. Reference is made to Rgure 14.

As indicated above, the accumulated CW value is reflected in the guidance price set displayed on the Exchange for all properties deemed to be of an investment type ie generates rental or lease income

The invention may be said broadly to consist in the parts, elements and features referred to or indicated in the specification of the application, individually or collectively, in any or all combinations of two or more of said parts, elements or features. Wherein the foregoing desaiption reference has been made to integers or components having known equivalents thereof, those integers are herein incorporated as if individually set forth.

It should be noted that various changes and modifications to the presently preferred embodiments described herein is apparent to those skilled in the art. Such changes and modifications may be made without departing from the spirit and scope of the invention and without diminishing itsattendant advantages. It istherefore intended that such changes and modifications be included within the scope of the invention. The above desaiption of the disclosed embodiments is provided to enable any person skilled in the art to make or use the invention. Various modifications to these embodiments is readily apparent to those skilled in the art, and the generic principles desai bed herein can be applied to other embodiments without departing from the spirit or scope of the invention. Thus, it is to be understood that the desaiption and drawings presented herein represent a presently preferred embodiment of the invention and are therefore representative of the subject matter which is broadly contemplated by the present invention. It is further understood that the scope of the present invention fully encompasses other embodiments that may become obviousto those skilled in the art.

Notes to the superscripts 1. If a PERwas valued at $100,000 on peEx, this relatively high unit cost would restrict the participation rate of many investors and participants

2. The ORV isthe Obligation Reference Value allocated in the underlying property asset and represents the amount of equity obligated by the property owner. The ORV is risk adjusted by multiplying the ORV by a fractional value called the Investor [Equity Value (IB/) that will vary between 1 and 10. For example, if the ORV is 10% and the IB/ is 1.25, the adjusted ORV in contract is 10 x 1.25 = 12.5% This ORV contract percentage constitutes the basis of the financial obligation of the property owner to pay to the investor an investment return, the ORV proportion as a percentage (%) in contract of the future sale economic performance or sale proceeds of the property or an equivalent amount based on the registered sale price or the CCV of the property at the time of sale. The date of the sale of the underlying asset and settlement of the PERis known as the 'redemption date'. At which time 12.5% of the proceeds of the property sale in contract would be redeemed or an equivalent amount in favour of the investor who owned the PER

3. The Certified Current Valuation of the underlying asset (property) is used in the origination of a PER security. It is supplied to peEx by one of a panel of licensed certified property valuers.

4. The Certified PER Value (CPV) for a PERisthe ORV component of the CCV value

5. The Indicative PER Value (IPV) is the risk rated Certified PER Value. This is calculated by applying a risk rating (AMR) of between 1% and 50% of the Certified price, the exact percentage of the AMR is based on the postcode or the type of the underlying property asset. The AMR provides a risk rating for the PER and provides some level of protection for the investor.

6. NOT USED

7. For example, a PER certified value of $100,000 could have no more than 200 smaller tradeable units in a price matrix spread that in this example, would create a minimum unit value of $500. Any amount lower than this would mean that brokerage commissions would erode the capital value of a PERtransaction to a lessthan acceptable level.

8. PPM the PER Reference Number -this number identifies the PER, the underlying property asset and owner details

9. UIN the Unit holder Identity Number for each PERand identifies all the unit holder details for cross referencing

10 The input of CCV data from external valuation contractors into the peEx database will occur automatically and will contain a verification mechanism that will measure each new data entry against the previous published CCV. A standard deviation of 5% or a similar amount is configured or adapted into the peEx database for each 6 month CCV entry period generating a system alert should the new data entry exceed the programmed standard deviation. In periods where markets are buoyant, the SD may be inaeased and conversely where the market is subdued (in respect to price activity and volatility), the SD may be decreased. The 6 monthly CCV data entries will either be submitted on a prescribed form along with the PPM or alternatively, the external contractor may input the data online into the peEx CCV repository where all the new CCV entries that have not generated system alerts i.e. verification mechanism can be uploaded to the peEx database which in turn will update the PERindexesand the Certified and Indicative Pricesfor each PERIisted on peEx.

Claims

1. A method for facilitating investment and/or monetizing equity in real property, the method comprising the steps of:

providing a total valuation amount or an obligation value amount of a real property, and creating an instrument having an initial value based on the total valuation amount or the obligation value amount.

2. A method for facilitating investment and/or monetizing equity in real property, the method comprising the steps of:

providing a total valuation amount or an obligation value amount of a real property, dividing the total valuation amount or obligation value amount into two or more unit valuation amounts, and

creating an instrument having an initial value based on one of the two or more unit valuation amounts.

3. A method according to claim 2 wherein the step of dividing the total valuation amount or obligation value amount into two or more unit valuation amounts comprises the step of dividing the total valuation amount or obligation value amount by a number (n) to provide two or more units having an equal value.

4. A method according to claim 3 wherein n is at least about 20, 50, 100, 500 or 1000.

5. A method according to any one of claims 1 to 4 wherein the instrument does not allow for or obligate the transfer of beneficial interest or beneficial ownership or right in the real property.

6. A method according to any one of claims 1 to 5 wherein the method is devoid of the step of transferring a beneficial interest or beneficial ownership or right in the real property.

7. A method according to any one of claims 1 to 6 wherein the instrument is a legal instrument and/or afinancial instrument.

8. A method according to any one of claims 1 to 7 wherein the instrument allows a holder of the instrument to benefit from any increase in the value of the real property over the time that the instrument has been held by t he buyer .

9. A method according to any one of claims 1 to 8 wherein the instrument is configured or adapted so as to be tradable.

10. A method according to any one of claims 1 to 9 comprising the step of providing a means for distributing income provided by the real property (or at least a proportion of that income) to a holder of the instrument.

11. An instrument having a value based on an underlying real property, the instrument configured or adapted to allow for a buyer of the instrument to benefit from an increase in the value of the underlying real property but without obligating or allowing transfer of beneficial ownership, or an equitable interest, or a right in the real property.

12. An instrument according to claim 11 wherein the value of instrument is based on a fraction of the underlying property.

13. An instrument according to claim 12 wherein the fraction is calculated by dividing the value of the underlying property into n units,

14. An instrument according to claim 13 wherein n isat least about 20, 50, 100, 500 or 1000.

15. An instrument according to any one of claims 11 to 14wherein the instrument does not allow for or obligate the transfer of beneficial interest or beneficial ownership or right in the real property.

16. An instrument according to any one of claims 11 to 15 wherein the instrument is a legal instrument and/or afinancial instrument.

17. An instrument according to any one of claims 11 to 16 wherein the instrument allows a holder of the instrument to benefit from any increase in the value of the real property over the time that the instrument has been held by the buyer.

18. An instrument according to any one of claims 11 to 17 wherein the instrument is configured or adapted so as to be tradable.

19. An instrument according to any one of claims 11 to 18, wherein the instrument is a retail residential property derivative.

20. A computer-readable memory containing processor executable program instructionsfor aeating a unitized security in a real property, the program instructions comprising the steps of:

accepting a data input being atotal valuation amount or an obligation value amount of the real property, and

dividing the total valuation amount or obligation value amount into two or more unit valuation amounts.

21. A computer readable memory according to claim 20 wherein the program instructions solve the equation UV=TV/n, where UV isthe unit valuation amount, TV isthe total valuation amount, and n isthe number of units required.

22. A computer readable memory according to claim 20 wherein the program instructions solve the equation UV=OV/n, where UV isthe unit valuation, OVisthe obligation value amount, and n isthe number of units required.

23. A computer-readable memory containing processor executable program instructionsfor aeating a proportional amount of a real property for the purpose of unitizing asecurity in a proport i on of a real property, t he program instructionscomprising the st eps of :

accepting a data input being atotal valuation amount of the real property, and multiplying the total valuation amount by afractional number to provide an obligation value amount.

24. A computer readable memory according to claim 23 wherein the program instructions solve the equation OV=TVx F, where OV isthe obligation value amount, TVisthe total valuation amount, and F is a fractional number.

25. A computer readable memory according to claim any one of claims 20 to 24 wherein n is at least about 20, 50, 100, 500 or 1000.

26. A computer-based exchange for the trading of an instrument, the computer comprising program instructions, the program instructions comprising the steps of :

accepting a first data input being an offer price for an instrument according to any one of claims 11 to 18,

accepting a second data input being a bid price for an instrument according to any one of claims 11 to 18,

comparing the offer price and the bid price, and

outputting an execution instruction where the offer price equals the bid price.

27. A computer-based exchange according to claim 26 wherein the execution instruction is configured or adapted to commence a settlement activity required by the exchange.

28. A computer based exchange according to claim 26 or claim 27 comprising a computer, the computer comprising computer readable memory, the computer readable memory comprising program instructions to solve the equation:

(TVx F)/n, where UVi is a unit valuation amount representing an indicative offer price, TV is the total valuation amount, F isafractional number and n isthe number of units required;

29. A computer-based exchange according to any one of claims 26 to 28 comprising a computer, the computer comprising computer readable memory, the computer readable memory comprising program instructions solve the equation UV₂=(OV - (OV x AMR))/n, where UV₂ is a unit valuation amount representing an indicative bid price, OV is the obligation valuation amount, AMR is the applied market risk and n is the number of units required.

30. A computer based exchange according to claim 28 or claim 29 comprising computer readable memory according to claim any one of claims 19 to 22 wherein n is at least about 20, 50, 100, 500 or 1000.

31. A computer-based exchange according to any one of claims 26 to 30 configured or adapted so that a transaction between a buyer and seller remains visible for a time period selected from the group consisting of at least about 1 , 2, 3, 4, 5, 6 or 7 days.