Commercial Property Syndication
Commercial Property Syndication
Commercial Property Syndication
Commercial Property Syndication
Commercial Property Syndication Key Attractions of Property Syndications Attractive Yield Typically speaking, Commercial Property Syndications are relatively high yielding compared to other investments such as residential property or bank term deposits. Regular Income Stream Cash distributions are typically paid monthly to investors making syndicates attractive to those wanting a regular income stream. Access to Property Not Possible Individually One of the main benefits for commercial property syndicate investors is being able to access property not usually possible via their own means. Access to large scale commercial property with strong tenants on long leases requires significant capital investment. This is made possible by investors pooling money together via syndication. Passive Investment Commercial Property Syndicate investors can enjoy passive income without the being involved in administrative aspects of the investment such as tenant and property management. These aspects are handled by the Manager. Key Risks of Property Syndications Liquidity Constraints Commercial Property Syndicates generally have a long-term investment horizon and may not have a fixed term. They are not designed to be short term investments and should not be considered by those wishing to have their funds mature in the near term. Many TML Syndicates allow for the property to be sold and syndicate wound up after 5 years with a vote passed by 55% of investors. Given of the lack of established secondary markets for syndication units, the sale of an interest in a syndicate may be difficult. Should an investor wish to sell their unit(s), the Manager will generally offer the unit to their investor base for sale on a best endeavours basis. Tenant Risk A default by a major tenant on its lease obligations, may limit the scheme s ability to pay distributions, and may result in a decreased property value. Undiversified In some cases, syndicate properties may be leased to a single tenant. Whilst theoretically less costly to administer, this lack of diversification presents a risk in the event that the single tenant defaults leaving no subsequent income to pay distributions and meet syndicate operating costs. DEBT Property syndicates may source loan funding for part of the purchase price generally around 45%-50% of the property s value. In an event that the property value should decreased for any reason, this may put pressure on bank Loan to Value requirements which may limit the syndicate s ability to pay distributions to Investors.
Commercial Property Syndication 7 How often are cash distributions made? Cash distributions are typically paid monthly. This is usually at the start of the month shortly after the tenant has paid rent for that month. 2 Can I sell my investment? There is a lack of established secondary markets for sales of interests in the commercial property syndicates. Should an interest holder wish to sell their interests, the Manager will offer the interests on behalf of the vendor to the existing interest holders. Should existing interest holders not take up the offer, the Manager may offer the interests to other eligible parties. The offer price per unit is based on the net asset backing per interest as at the date of the last audited financial statements. However, the final purchase price would be as agreed between the vendor and the purchaser. 8 9 Does the entity I use to invest matter (IE, Company/Trust/Individual)? Investors should seek independent advice as on how best to structure their investment entities. TML syndicates are made available to companies, trusts and individuals as investors. Does Taurus Management Limited provide financial advice? No. TML is not authorised to give financial advice. Readers should always consider taking independent financial advice before making investment decisions. 3 What is the investment structure? A syndicate managed by TML is typically a Management Investment Scheme (MIS), established under the provisions of the Financial Markets Conduct Act 2013. Syndicates are governed by an Ownership and Management Deed ('OMD') between the Manager, the Nominee, and the Investors. 4 How is the syndicate governed? At TML, syndicates are governed by an OMD. A nominee company purchases the investment property and owns it on behalf of the investors. The Manager is appointed to manage the property on behalf of the investors under the terms of the OMD. The OMD also provides for the internal rules of the syndicate such as meetings, remuneration of the Manager and winding up of the syndicate. 5 Who holds legal title to the property? For syndicates managed by TML, legal title to the syndicate s property is typically held by a Nominee company as bare trustee on behalf of investors in the Scheme. The Nominee s sole purpose is to own the property for and on behalf of the Investors in accordance with the OMD. While the Nominee holds the legal title to the Property, the investors retain beneficial ownership of the Properties in proportion to the number of interests that they hold in the syndicate.