Property Syndicate Investment Due Diligence (Investing in Property Funds)
Are you considering investing in a property syndicate or fund? Unlisted Real estate syndicates (through a unit trust or company shares) are common in the property development and commercial property space. If you're new to investing in property syndicates, I'll be going through an actual Information Memorandum and explaining how to conduct due diligence to make sure you're making an informed investment decision. 🔔 SUBSCRIBE: https://bit.ly/2ABxWz1
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Read our disclaimer: all information about property syndicates is general and does NOT form any part of financial advice. ❗DISCLAIMER: https://bit.ly/2zldMJh
The first area of discussion is property syndicate fees. These include the development management fee, property acquisitions fee, capital raising fee for the fund, director's fee for funding and a profit share to the syndicate manager.
It's essential to be clear if the fee's to the property syndicator is fixed or do they increase or fall with the projects return? Are all of the fees included in the property development feasibility? Is the structure of the fees aligned with the investor? Are the represented returns including or excluding the fees? Also, what other ways can the syndicator be paid?
Closely related to the property syndicates' fees are the project costs. What discretion does the real estate development manager have to pay for and apportion operational expenses?
The structure of property syndicates can be through a unit trust or company. This is no different to a Real Estate Investment Trust (REIT). The only difference between an unlisted property fund and a REIT is that units or shares are exchangeable on the ASX.
It is important to consider the holding entity of the property fund. Some initial due diligence can include doing an ASIC search. Also, be mindful if you can transfer shares or units once you're invested in the syndicate.
Information Memorandums for property syndicates are complicated documents, so be sure to read them thoroughly to understand your investment.