About property syndicates
A property syndicate typically raises money from multiple individual investors to buy property. Returns are shared among the investors. Syndicates can invest in commercial, industrial, residential or agricultural property, and in existing buildings or development projects.
Property syndicates are offered under different legal structures:
- Managed investment schemes, where the manager is licensed by the FMA, and units in the scheme are offered to retail investors.
- Companies (or ‘equity’), where the form of the investment is company shares.
It is important you understand what structure a syndicate is using, as this will determine the type of disclosure documents you will receive to help you make investment decisions, the amount of oversight we have over the syndicate, and the protections you have as an investor. Syndicates often have a minimum investment size, which is typically around $50,000
Some property syndicates are only available to wholesale investors. For these offers, many Financial Markets Conduct Act disclosure and governance requirements do not apply. As a wholesale investor, you may not have protections available to retail investors such as access to a free dispute resolution scheme. We strongly recommend talking to a financial adviser if you are considering investing in a wholesale syndicate offer.
Some syndicated offers invest in farming projects or forestry rather than property. These projects may have different risks to the ones described on this page.
Understanding returns
Property syndicates are typically advertised with a forecast percentage return. Some syndicates pay this as a distribution or dividend on a regular basis. However, investment returns are not certain and can vary.
Returns may be different to the advertised rate
Investment returns for commercial property syndicates are based on the property’s rental income, minus the costs of operating the syndicate. Changes in the value of the property also affect returns. If the value of the property increases, the value of your units or shares should also increase. However, these gains will not be crystallised unless you sell your investment (which may be difficult - see below).
Forecasts for returns are based on various assumptions, which can be impacted by a wide variety of factors or risks:
- tenants move out of the property and there is a delay finding new ones
- tenants can’t afford to pay their rent and outgoings
- the property manager or others involved in the syndicate increase their fees
- interest rates change and this affects the syndicate's mortgage payments
- the property needs repairs or maintenance
- increases in insurance premiums
- possible capital gains or losses if the property is sold
- a loss in property value increases the gearing of the property, meaning it cannot pay distributions as it needs to reduce borrowings
Some syndicates develop property, either to hold or sell. Property development can be a high-risk activity with numerous examples of investors losing money – if you do not understand the risks and how they fit with your investment profile then you should seek financial advice.