Invest like a high-net-worth individual without spending millions of dollars, with Silverfin Capital’s proportionate syndication model. – JUNO JANUARY 2020
Many people want to diversify their investments into property, but find the cost of buying a quality commercial building prohibitive and the ongoing management burdensome
With Silverfin’s proportional ownership investment structure, ordinary Kiwis can become commercial landlords without the hefty price-tag, or the hassles of
managing tenants, says chief excecutive Miles Brown.
“We enable people to invest as though they were an institutional investor or
high-net-worth individual, by purchasing smaller parcels of high-quality commercial real estate.”
The company was set up by the late Cheryl Macaulay in 2016 and the company is staying true to her legacy of buying high-quality, top-performing commercial and industrial assets.
Says Brown: “Silverfin’s portfolio has grown at roughly NZ$100 million worth of property every year for three-and-a-half years and we’re currently sitting at about NZ$400 million.”
Silverfin’s goal is to syndicate $100 million worth of high-quality commercial property every year.
How syndication works
Syndication is a tried and true model that’s been used for over 30 years.
Silverfin gets a property with good investment fundamentals under contract, splits the ownership of the property up into parcels, say, 200 units of NZ$50,000 each and then raises the required equity by selling the units to investors.
Everybody who buys a unit in that property owns their percentage of it. Dividends drop into the investor’s account monthly, pre-tax, which is useful for charitable trusts, who don’t pay tax on their investments.
Silverfin’s latest scheme is the syndication of a supermarket leased to a national chain in Tauranga, a key location in the golden triangle.
Attractive returns are making syndication a popular choice now that bank rates are at an all-time low, says Brown.
“We find that lots of people are moving money out of their current accounts at the banks and into this sort of investment product. We expect the trend to continue while interest rates remain low.”
Brown says many investors are also moving to syndication after being landlords.
“We offer a mechanism for them to still participate in direct property ownership without the management hassle that goes with it.”
Mitigating the risks
Property syndication works best as a medium to long-term investing strategy, but investors are able to list their units for sale on the Syndex platform at any time.
Syndex was created to provide a market place for the secondary sale of syndication units.
There are risks in syndication, but Silverfin works hard to minimise them, says Brown.
One risk is rising interest rates. Silverfin typically uses debt to fund up to half the cost of each acquisition. Rising interest rates could reduce an investor’s returns over time – although the impact can be mitigated by increasing rents. .
Another is tenant risk. “But to minimise that risk, we target long-term leases with robust tenants.”
Other issues that can be managed are repairs, insurance and leverage – the need to extend loans from time to time.
“What we’re all about is finding quality property investments for our investors which will offer between a 6.5 and 8 per cent per annum pre-tax distribution return, and have good prospects for capital growth”
Silverfin is run by a passionate, tight-knit team that puts investors’ interests first, says Brown. The door is always open for coffees and a chat.