Syndicates plug gap in market

PROPERTY SYNDICATES are increasingly filling the void left by the demise of finance companies as mum and dad investors chase higher returns on their money.

At the same time, their importance to the property market as a source of funding is increasing.

Syndicates have typically been offering gross yields of about 8-10 per cent (exclusive of any capital gains), compared with bank deposits which have been offering interest rates of 3-5 per cent and property-based listed stocks, most of which are providing gross yields of about 6-7 per cent.

Syndicates also have the advantage of usually paying monthly cash distributions, increasing their popularity with people such as retirees seeking a steady income stream.

There are signs that their popularity with investors is attracting new players into the market, with Australian property fund managers now promoting their wares in this country (see page 9) and new types of products being offered.

Most of the syndicates which have come to market over the last few years have been fully developed commercial properties, either industrial, office or retail premises, usually with blue-chip tenants on long-term leases.

Most are brought to market by one or other of the large syndication companies that specialise in this sector of the market, and then continue to manage the properties on their investors’ behalf once the syndicates have been sold down.

But a couple of recent offerings have broken that mould and moved into new territory.

One of these is a scheme being floated by Wellington property developer and investor Ian Cassels who is looking to syndicate ownership of a Wellington apartment building.

Cassels is a major shareholder