What are property syndicates?
The cost of commercial and industrial properties is often too expensive for individuals to acquire. A
property syndicate is a structure which allows individuals to invest in commercial and industrial
property assets which would under normal circumstances be out of their financial reach. In essence
the property syndication gives investors direct property exposure.
The typical property syndicate has the following characteristics.
- A group of investors who invest under a structure to purchase direct property.
- The funds contributed by the investors are used as the equity component towards the purchase of the property.
- The fund / structure may or may not using gearing. The higher the gearing the higher the risk, at the same time the higher the gearing the greater the potential returns.
- In a lot of cases the fund is an Unlisted Property Trust. The Trust is managed by a fund manager. Investors subscribe for units in the Property Trust.
- Owning a property in a Unit Trust structure allows units to be issued to investors, much like shares in a company.
A crucial difference between a Unit Trust and a company is that a Unit Trust is not directly liable for tax but rather is a ‘flow through’ entity placing the burden of tax on the individual or entity that owns the units.
- Unit Trusts are managed according to their own particular set of rules, as set out in the Trust Deed.