September 19, 2019 - Peak Equities
Category : Blog
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Also known as Unlisted Property Trusts (UPT) or Real Estate Investment Trusts (REIT), offer qualifying, sophisticated investors, the opportunity to participate in the ownership of high quality commercial real estate that would ordinarily be beyond the reach of an individual investor.
Each syndicate established by Peak Equities Pty Ltd (Peak), acquires a single designated property. Syndicates such as these are known as “single property vehicles”. The syndicate is legally structured as a Unit Trust, with investors applying for Ordinary Units in The Trust. A unit trust is similar in many respects to a company, with units having most of the same characteristics as company shares. Each Unit-holder is entitled to share in the income and capital of the trust, in proportion to their unit holding.
These syndicates are established for a finite period (usually around 5 years), after which it is intended (but not mandated), that the asset be sold. Peak syndicates guarantee Ordinary Unit-holders the right to cash out their investment after 5 years, whether or not the property is sold at that time. The Trustee has the right to sell the property and wind up the trust before 5 years, if it considers it in the best interest of Unit-holders to do so.
The AFSL holder acts as Trustee of the Unit trust that acquires the property and the title to the property and mortgage finance are in the Trustee’s name. Under this structure, Investors have no liability either to the mortgagor, or to any trust creditors. This form of borrowing is described as “non-recourse”.
The day-to-day affairs of the Trust and Property are delegated to an associated company. This company is responsible for the establishment of the Syndicate; negotiating the purchase of the property; arranging all leases, financing arrangements and other agreements; maintaining all corporate and financial records; and dealing with estate agents, tenants and contractors.
Syndicate operators are required to hold an Australian Financial Services Licence (AFSL) which imposes comprehensive and strenuous obligations on the licensee. Principals of the licensee must possess extensive relevant experience and the appropriate degree of expertise. The conduct of a licensee is tightly regulated and the company is audited annually, with the auditors certifying that the company is complying with all of its legal and statutory obligations. The affairs and finances of each Unit Trust are also audited individually on an annual basis.
Wholesale investment products of this kind can only be offered to Sophisticated Investors, as defined in the Corporations Law, which requires each investor to obtain a signed confirmation from their accountant or taxation agent, confirming that the investor (and associates where designated) either own assets of greater than $2.5 million or have earned in excess of $250,000 in each of the previous 2 financial years. Where an investor invests $500,000 or more in a syndicated offering, they are not required to provide a Sophisticated Investor Certificate.
All returns to Investors are expressed in terms of the income and capital available to them, after the payment of any fees or entitlements to Peak or its associates. The quoted annual return is the return available to Ordinary Unit-holders.
A property syndicate will invest directly into commercial and industrial properties. It consists of a group of investors who, individually, would not have sufficient capital to invest in commercial real estate. By pooling funds together, the commercial property syndicate can acquire a larger more valuable property with better income return and capital growth potential.
The members of the property syndicate are entitled to a share of the income derived from the high yield secure investment. At Peak Equities, we manage the commercial property investment for a fee so that you do not have to worry about collecting rent from tenants, dealing with maintenance issues and managing expenses.
Before you invest in a property syndicate, it is advisable to conduct comprehensive due diligence. This might require you to engage experts in areas such as property investment, legal, accounting and finance. It is important that you are comfortable with the investment prior to making the commitment. At Peak Equities, we can help you navigate this process.
Here is a list of factors you should consider before investing in a commercial property syndicate:
The property syndicate will pool funds from many investors and acquire real estate property for the benefit of all those involved in the syndicate. The syndicate will typically be created using a real estate investment trust arrangement. An agreement will govern the relationship between all parties and stipulate key terms and conditions of the unlisted property trust.
A key term in the agreement is the objective of the property syndicate. This will identify the reasons for the creation of the property syndicate as the goals are typically shared across the group. At Peak Equities, we can help you and your fellow syndicate members understand the terms of the agreement so that you are comfortable with your investment.
Here is a list of the benefits of syndicated property investment:
Here is a list of the risks with syndicated property investment:
The property market in Australia is strong, resilient and growing. With the population increasing due to natural births and migration, there will be a rising demand for housing, commercial offices and industrial spaces into the future. As the urban areas fill with people, and more people consider living away from the city, new developments will be created to house the expanding population.
With secure lending arrangements, robust government policy and taxation benefits, investing in property in Australia is ideal. A property syndicate will enable you to invest in the property market quicker and be able to access higher yield and stronger capital gains from large scale developments. This will help you build a diversified portfolio with reasonable returns to help you achieve your financial goals quicker.
Peak Equities is an established and leading specialist property syndicator servicing the sophisticated investor market. With an impressive track record and extensive experience in commercial real estate investing and asset management, we focus on wealth creation and security for our clients by sourcing high yield, secure investments with sound growth potential. From the time of acquisition and throughout the investment term, we engage closely with our investors to ensure that individual needs and expectations are satisfied.
We have a team of experienced professionals who understand the property market and strive to strengthen our investors’ portfolios. Our client-focussed approach differentiates our offering in the market. Contact us today by calling (03) 9863 8380 or email firstname.lastname@example.org to learn more about commercial property syndicates.
A property trust or property syndicate is a method of investing in many properties without owning them completely. Real estate are expensive investments for the average investor. In order to invest in property when you do not have the funds to acquire the property entirely, a property trust allows you to acquire units in the property trust. This helps investors band together to acquire the property through a central owner who holds the property on trust for various unit holders. Each unit holder is entitled to share in the income and capital of the trust, in proportion to their unit holding.
Property syndicates are established through a central body, i.e. us, for a finite period (usually around 5 years), after which it is intended (but not mandated), that the asset be sold. Our syndicates guarantee ordinary unit holders the right to cash out their investment after 5 years, whether or not the property is sold at that time. We, as the trustee, have the right to sell the property and wind up the trust before 5 years, if we consider it in the best interests of unit holders to do so.
Syndicate operators are required to hold an AFSL which imposes comprehensive and strenuous obligations on the licensee to protect the financial interests of individuals. Principals of the licensee must possess extensive relevant experience and the appropriate degree of expertise. The conduct of a licensee is tightly regulated, and the company is audited annually, with the auditors certifying that the company is complying with all applicable legal obligations.
Unlike property syndicates, direct property investment allows investors to acquire properties outright and lease the property to investors for a return. Direct property investment requires the investor to have the funds to acquire the property (or with the assistance of funds from a loan) and then lease the property out and reap the full rental return and capital growth.
Instead of acquiring the entire property yourself, you invest your funds with a trustee who will manage the investment for you in your best interests. Trustees have strict obligations to conduct their operations in an effective manner. Each unit holder will be entitled to a proportion of the rents and capital growth depending on the number of units they have acquired. This helps investors who are unable to purchase entire properties enter the real estate investment market.
Like any type of investment, there are positives and negatives. There is no static guide to whether commercial property is a good investment. The real estate investment market changes daily and it is essential that you engage a professional advisor to provide with you specific, accurate and up-to-date advice when you are ready to invest.
A real estate syndicate is a group of investors who pool their funds to buy or build properties. It’s not easy for individual to buy such big or commercial properties but it’s possible for a group of financial backers or investors to invest in big real estate projects.
September 19, 2019