Excellent returns, strong tenant demand and lower volatility – industrial investment continues to be a crowd-pleaser.. – Informed Investor, Spring 2022

When it comes to investing in commercial property, the industrial sector has always been a crowd pleaser. It has provided excellent returns, with strong tenant demand and less volatility than retail or office spaces. One of the barriers to investing in the industrial sector is ‘lot size,’ or quantum of the purchase price. That’s where syndication comes in: it offers exposure to high quality commercial property, allowing investors to diversify their portfolio without the large price tag.

Spotting growth potential in Wiri

For property syndication specialists Silverfin Capital, an industrial property was the perfect place to start building a portfolio. In 2016, Silverfin purchased 21 Hobill Avenue in Wiri, Auckland – a 15,000m2 warehouse. The team looked at the property and found a lot to like:

  • An excellent location in an established industrial precinct
  • Minor vacancies that could be filled to immediately add value
  • Below-market leases meant the opportunity to boost income

Silverfin paid $22.34 million for the property and it was syndicated among 30 individual investors. They were paid a distribution of 8% per annum (pretax) over six years. Distributions were paid monthly, even throughout multiple lockdowns and the impacts of COVID19.

Selling the property at a high point

The Hobill Avenue warehouse was sold in February 2022, making it the first of Silverfin’s syndication schemes to go through the full syndication life cycle.

“Towards the end of last year we believe that the industrial market was close to its peak,” says Miles Brown, CEO. “We recommended to our investors that they should consider selling the property. The recommendation was put to a vote and 100% of investors were in favour.”

The property proved popular in the market and sold for $42.1 million – an 88% increase on the purchase price.

A 22% annual return

The final return to those 30 investors in the Hobill Avenue property was 22% per annum over six years; “In comparison, the NZX delivered an annual return of 7.4% over a parallel five-year period,” Brown notes. “But although this scheme delivered a very solid return, not all syndications schemes perform equally, and the outcome depends on the strength of the underlying real estate.”

Silverfin Capital have completed 25 syndication schemes to date and have $615 million in property under management. Investors can apply to be part of a new syndicate, or purchase units in existing syndicates on the secondary market. Silverfin is fully licenced by the FMA to offer both retail and wholesale syndication investments.