Syndicated property
In this section:
- Syndication- the route for direct shared ownership
- Income investments
- Geared or borrowed syndicates
- Ownership
- Repayment of syndicate shares
- Overview
Many of our clients have asked us why we have moved into commercial property purchases and our response to them is that, historically, approximately one-third of our clients' pension fund monies, now totalling some £1.6 billion, has been invested in the clients' own commercial properties. Therefore, property syndication is really an extension of an existing tried and tested investment concept.
In the current market, an individual buying a property would have to spend well in excess of £1,000,000 to buy good commercial property in a good location, with a half decent tenant. Not many clients would wish to spend that amount of money on one property. The benefit of the property syndicates is that, using our nationwide resource of property agents, we are able to assist clients to jointly purchase properties well in excess of £1,000,000. This ensures that we can get the best locations, the very best tenants, at prices that are just above the price most people are willing to pay - prices where most of the substantial institutions believe a property investment is too small.
Syndication - the route for direct shared ownership
By joining forces, clients are able to invest between £20,000 and £50,000 to own a percentage of a large and substantial property. Over a period of 12 to 18 months, many choose to invest in several syndicates and hence spread their risk.
Income investments
Those clients who are looking at producing as much income as possible would invest via income producing investments. The net income, allowing for all costs, is typically in the range of 5.5% to 7% and this secure income stream is key for clients in retirement or close to retirement.
Geared or borrowed syndicates
Those taking a ten year plus view are more likely to invest in geared syndicates where a percentage of the purchase price is assisted by way of a loan. Typically, the loans are repaid within 10 to 15 years and this really gives a great potential boost to medium to long-term investment planning. Once a geared investment's loan has been repaid, it will be paying a yield on initial investments of around 12% to 15% depending on the level of gearing at outset, which suits most long-term pension investment clients as it is normally 10 to 15 years hence when they are looking at maximising their income. With the new ability to invest funds beyond age 75 and with the new borrowing limits for all pension funds, including those in pension drawdown, the geared facility offers clients aged 60 to 65 the ability to gear their pension funds up to protect the long-term position that their funds are now capable of enjoying.
Ownership
Syndicate members exercise day to day control over all matters relating to the property and the syndicate itself. They will be required to make all the necessary decisions relating to the management of the syndicate. MW undertakes an administrative role as instructed by the members alongside other key professionals including legal and property advisers
Repayment of syndicate shares
To date all requirements for encashment have been met. This is achieved by either an investor coming in or the syndicate itself may want to simply swallow up the percentage ownership. Any buy-back is at full market value. The members can also decide to sell the property if 'value' can be gained and they choose to do so. All decisions are made by the syndicate members themselves.
Overview
The property syndicate initiative started in 2002 has been very successful to date.
Property syndication is a very valuable and efficient tool and one which the directors and senior consultants of the business employ in the investments of their own pension schemes.