Property syndication coming back to life

Investor interest in property syndicates could be on the cusp of coming back to life both across the Tasman and closer to home.

Friday, March 12th 2010, 5:37AM

by Sonia Speedy

Standard & Poor's has released a report on direct property syndicates focused on the Australian market. It suggests a lack of liquidity in unlisted open-ended funds as well as attractive buying opportunities means conditions are right for property syndicates to "resume centre stage".

Signs of the investment vehicle's re-emergence were evident last year there, however, investors were still lukewarm about locking up their capital, it says.

Augusta Funds Management managing director Mark Francis says the New Zealand market differs to Australia in that there are fewer unlisted open-ended style funds on offer.

But he says Augusta has already seen a big increase in activity in the secondary market for units trading in existing syndicates.

"That's a really good indication of the depth of that market. There haven't been any new offerings out there for some time, so the secondary market has really come to life," Francis says.

He says new opportunities are appearing - such as an industrial building in Palmerston North being marketed by Bayleys that has an eight-year lease to Coca Cola and is showing a 9% return.

Low bank deposit and interest rates and softening yields add to the attractiveness of syndicates currently, Francis says.

But Paul Markham of Independent Investment Brokers is still wary. He says unless property syndicates are running a good secondary market, liquidity can be an issue.

Markham says: "They're very easy to get into but as we've seen from bitter experience with the Money Managers' ones and all that, when people want their money out it's very, very difficult - or historically it has been."

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