Property syndicates, as an investment vehicle are not new, but throughout history have had many skeptics.
Looking at news archives this goes back to the early 2000s as a number of syndicates (from a surge in popularity of the 1990s) underperformed. A further surge of interest occurred around 2008 following the GFC and the failure of many finance companies. The news archives show numerous pieces with some very strong viewpoints:
"It continues to mystify that Kiwi punters persist in being suckered by property syndicates. As victims are now discovering, expensive, illiquid and poorly diversified rental streams can be suddenly consumed by management, refits or debt servicing, and without recourse.” NZ Herald 20021.
“These schemes, which have proliferated in recent months, are illiquid, offer unrealistic returns and will probably lead to large capital losses for investors.” NZ Herald 20092.
The various news outlet articles over the years hold a common thread with articles over the years sounding the same; that the main concern about property syndication was liquidity, or more precisely the illiquidity.
This issue is driven by the fact that syndications often do not have a finite term and a wind-up requires about two thirds of investors to agree to a sale. Plus there are factors difficult to predict; the value of the investment in 10 years time, valuation depending on strength of tenant, condition of the building, and interest rate on borrowings amongst other things.
In 2014 Syndex bought liquidity to the market to solve this exact issue. The syndicator, by deciding to list on Syndex, empowers their investors to manage their exit from an investment on a secondary market that is operated (at arm’s length from the syndicator) in a fair, orderly and transparent manner, thereby ensuring that a market-related price is struck between the buyer and the seller. This self-serve function allows for peer-to-peer communication, bidding and selling of their portion of investment as and when they like, based on market demand.
Silverfin Issues are commonly seen on the secondary market and many complete successful sales in under 3 days. Good stock is in demand.
With this solution in place, it has to be noted that property syndicates are not short term investments, but are an opportunity to achieve regular income, and over time a reasonable-to-good ROI. The liquidity option is a safe-guard for investors, who may need to draw funds for some reason.
Another surge in popularity of property syndicates is likely here now, as the banks offer low interest rates for savings. We hope that in a decade or so, when we look back at this time immortalised in online articles we see a different narrative, one that doesn’t include illiquidity.
To view our secondary market offers click here.
To read more about property syndicates click here.
Syndicates, also known as proportionate ownership. When you invest in a Syndicate you buy a share of the property and receive a proportional share of its income. The property is managed on your behalf by the property manager which will often be the Syndicator or related business.
Financial investment involves risk of loss - please seek professional advice before making any investment decisions. The views and opinions expressed in this blog are those of the authors. The information we present is of a general nature and should be used as a place to start your own research. It is not intended as investment or financial advice.