Tell Me Exactly How Private Syndicates Work?

FIRSTLY, LET’S TRY to give you a clear definition of a property syndicate.

A property syndicate is a direct property investment through a trust structure – whereby numerous investors pool their equity, to invest into commercial real estate.

As a general rule … the objectives of a property syndicate would include investing in properties with quality tenants, long-term leases, strong returns and with a good potential for capital growth.

In other words: The aim is … to bring together like-minded Investors seeking to achieve a common investment goal.

As you’re probably aware, Australia has thousands of Public syndicates investing in office towers, shopping centres, industrial facilities, private hospitals, hotels and kindergartens – sometimes even involving residential development and mezzanine debt (for those who like a higher-risk investment).

And generally, these syndicates involve between 200 and 500 investors. However, a Private Syndicate generally only has 4 to 6 investors – no certainly, more than twenty investors involved.

The Market “Sweet Spot” for Commercial Property

As you can see from the chart below … Private Syndicates are able to take full advantage of a sweet spot in the market (between $3 million & $8 million) – where the Commercial properties seem to be too expensive for most Wealthy individuals, but priced below the range attractive for Small Institutions.

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This is where like-minded investors are able to band together, in order to acquire good-quality Commercial investment property – secured on long-term leases, to established tenants.

And the attraction with Private Syndicates is that you (as an investor) actually run the show.

Still there may be Some Lingering Concerns

Unless you have a properly-structured Trust Deed, many investors could feel …

  • Their Equity is locked in, with no easy Exit;
  • They have no say in actually choosing the Property;
  • They could be required to guarantee the joint Loan;
  • With many people involved, there is no sense of belonging.

However, there is a Solution

Having worked for nearly 20 years helping clients with their Private Syndicates … I been able to put together a model to address (and also overcome) these concerns. As such, the Trust Deed includes:

  • Members choosing the actual Property;
  • Setting fundamental Buying Criteria;
  • Mandatory 4-year Reviews for the syndicate to continue;
  • Only non-recourse Finance;
  • Regular Member meetings;
  • Pre-determined Exit mechanism.

As such, the Syndicate Trust Deed is very much a working document – because it actually provides you with the comfort you require … by including numerous safeguards.

Anyway, if you’d like to learn more … you can download this Paper which has been put together to explain it all to you in further detail.

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