How Property Syndication Works
Property Syndicate investments present an opportunity to earn long term income with the potential of capital gains.
A property syndicate is an investment designed to give investors with limited capital the opportunity to invest in commercial, retail and industrial properties.
Investors receive distribution income (from rents) during the life of the syndicate and a capital gain upon wind up, if the property is sold for a profit. Syndicates have an indefinite life.
Syndicates can be built around a single property or a group of properties and are close-ended. That is, they involve a restricted number of investors and a set amount of capital to be raised. Investments in property syndicates generally start at $25,000 depending on the offer.
A property is identified by the Team that has the potential to provide long term cash flow to investors and the possibility of capital gains upon sale of the asset. The property is usually acquired by a company and will normally be geared with bank debt.Cash flow is generated through long term leases to quality tenants.
How we deliver value
We endeavor to deliver value through;
- Purchasing well.
- Consistent, hands on management of assets including prudent management of costs and outgoings, ongoing asset maintenance, regular inspections and strong relationships with the tenants;
- A well- defined exit strategy aimed at unlocking the full value of assets.
The process of property syndication can be broken down in six steps.
1. Preliminary Phase
The Team uses their established networks to source potential properties capable of providing long term cash flow to investors and the possibility of capital gains on sale of the asset.
Properties are generally in the $10 million to $20 million range although exceptions will be made for outstanding assets and opportunities. This price band sits above the scope of most private investors to fund on their own.
Based on information provided by the vendor and our own property market research we complete financial modeling on the properties to obtain comfort that our target return is achievable. Each property is chosen for its potential to provide reliable income of 7.5% to 8.5% per annum over the life of the syndicate and a capital gain for investors.
2. Negotiation Phase
A conditional contract is lodged with the vendor. The conditional contract is subject to satisfactory due diligence and in some instances, may also be conditional upon the necessary funds being raised from investors.
3. Due Diligence Phase
Through the due diligence process we;
- Establish the title to the property and the legal basis of tenancies;
- Assess the capital expenditure and maintenance needs of the property;
- Compile information for management of the property and for disclosure to investors and financiers; and
- Obtain a market valuation on the property from an independent, registered valuer.
4. Fund Raising Phase
The acquisition of the property and the syndicate establishment costs are funded by way of a bank loan in combination with funds from investors.
An offering document is compiled to communicate the benefits and risks of investment in the property syndicate to investors. Every care is taken to ensure the offering document is accurate and complete. The funds raised from investors are held in a trust account until all contract conditions are fulfilled.
Once the necessary funds have been raised from investors and bank conditions have been met the Syndicate settles its purchase of the property. Shares are issued to investors and the Syndicate commences.
6. Ongoing Management
We manage the property to facilitate the success of the tenant’s business as in our view successful tenants make a successful property investment. Successful tenants can afford to pay their rent in a timely fashion and renew their leases.