Augusta's offer of Telecom House

[Anthonyacat]

Bit of an old post to reincarnate here, but while it's here thought I'd answer your question re: better options.

Broadly diversified investments in the stockmarket - NZX50-tracker, or such.
Narrowly diversified investments in the stockmarket - Specific investments in 4-10 stocks NZX, perhaps including property stocks
Diversified Peer to Peer Lending - Harmoney claims a 12% return after fees and defaults.
Deposit on a property worth $250-$500k

All seem to be better options to me. The P2P lending is a new concept and as yet unproven in New Zealand, but it's been going well for me for the last few months; only have $10k in there so far.

[HattrickNZ]

I haven't looked at the offer, but a practice I have seen from time to time is this:

1. Rent at a very high face value to a high value blue chip tenant, in exchange for a very generous rent holiday and inducements that don't appear in the deed of lease but which reduce the effective rent so that the tenant is happy.

2. Use the rent, which mentions none of these inducements, to get a sky high valuation.

3. Sell the property to syndicated investors who look at the term, tenant and rent and think they're getting a decent return.

4. Stay on as manager and cream a healthy fee for doing very little.

5. Watch the investors realise, six years down the track when the lease comes up for market review, that they are going to take a big rent bath and that their building will barely be worth what they paid for it six years ago...or even less.

6. In twelve years time the blue chip tenant vacates, and the investors find they can't attract a new one without an extensive makeover and inducements that they cannot fund. The building gets occupied by a number of smaller tenants piecemeal, and the rent roll falls still further in comparison to the original "deal".

If the investors are in luck, the movement of the market over those 12 years saves them and delivers a profit of sorts, but one which will still be mediocre in comparison to what it should have been.

This is very informative Ivan, and what I suspected all along. But is your view here a possible worse case scenario, or at least below average?
What if rents keep increasing, and the tennent stays and even renews for other terms? Is it then an okay investment, even though the fees might be high? i mean they were offering an 8% return (I think).

Bit of an old post to reincarnate here, but while it's here thought I'd answer your question re: better options.

Broadly diversified investments in the stockmarket - NZX50-tracker, or such.
Narrowly diversified investments in the stockmarket - Specific investments in 4-10 stocks NZX, perhaps including property stocks
Diversified Peer to Peer Lending - Harmoney claims a 12% return after fees and defaults.
Deposit on a property worth $250-$500k

All seem to be better options to me. The P2P lending is a new concept and as yet unproven in New Zealand, but it's been going well for me for the last few months; only have $10k in there so far.

Can you advise how I would go about investing something like this "Broadly diversified investments in the stockmarket - NZX50-tracker, or such."? Whats a good broker with low fees...etc?
Also do you know of a similar website/forums like propertytalk that is setup for these types of investments. propertytalk seems to be mainly for property related investments.

I had heard of harmoney but did not realise the returns where that high. It is interesting where that peer to peer will go.

[Anthonyacat]

As far as I know the best nzx50 tracker is the nzxs own Smartshares. Their SmartFONZ fund appears to be what you're looking for, but they have others. Have a good read though, this is the only option I suggested I haven't tried myself.

http://www.smartshares.nzx.com/documents/smartshares/smartshares-funds/FONZ%20September%2014.pdf

Advertised fees are 0.75%, don't know if there are hidden fees, but would doubt it from the NZX.

As for a discussion website, sharetrader is good, but not as active as propertytalk. And you won't find much in the way of index fund discussions, because they are by nature passive investments with little to talk about.

Something I must stress is that all the options I suggested are 'better' than the property option discussed in this thread, on a risk/return weighed basis. There is still an element of risk to all of these.

[Ivan McIntosh]

This is very informative Ivan, and what I suspected all along. But is your view here a possible worse case scenario, or at least below average?
What if rents keep increasing, and the tennent stays and even renews for other terms? Is it then an okay investment, even though the fees might be high? i mean they were offering an 8% return (I think).




Can you advise how I would go about investing something like this "Broadly diversified investments in the stockmarket - NZX50-tracker, or such."? Whats a good broker with low fees...etc?
Also do you know of a similar website/forums like propertytalk that is setup for these types of investments. propertytalk seems to be mainly for property related investments.

I had heard of harmoney but did not realise the returns where that high. It is interesting where that peer to peer will go.

In my opinion, that type of syndicated property outcome is common enough to be very wary. Which is not to say never invest in that manner - there are syndicated property deals with a decent variety of tenants on realistic rents. However even then they tend to have very generous (to themselves) setup costs. It is a question of looking at them very carefully, in particular the leases and any rental valuations, to work out your potential return/risk.

Investing in the sharemarket...try someone like Craigs Investment Partners, which is who we (me and two other friends) use. Or ask friends and family for recommendations.

[deepu]

syndicated investment opportunities

Hi there, first time poster long time lurker here.

I would be interested to know what people think of this report I done on syndicated investment properties in general. To add more context I have used a recent offeringby augusta as feel this will help me understand it better. I am basically building on from alot of posts on here already and various other places, which has greatly increased my knowledge.

Below I have given a snippet of it. I consider myself a novice and am looking more experienced and knowledgeable on here to help me in my understandings and analysis. I really do welcome constructive, comments, good and bad, as I am hoping to learn.

Snippet below: Scrap that

I cant provide links, i will just post it all. Hope the formatting comes out ok. How many posts do I have to do before I can provide the link? Scrap that.

Its 10 posts, I will just post the bits that I can until I can post the links.

thanks in advance.

================================================== ================================================== ==============================

Getting a Better Understanding of Syndicated Investment Properties


Intro

Syndicated investment Properties seem very popular at the minute and here I would like to write this report to 1) get a better understanding of its make up, 2) get other advice from other more intelligent/experienced investors on how to analyse such investments. The syndicate investment I am looking at is provided by Augusta, marketed by Bayleys. Initially this started as some notes, or a kind of report on its details. But I hope to use it for future reference, for my benefit alone if anything. In future I would hope to look back on this and would hope that it would act as some barometer of how well the investment done or did not do. Otherwise, without this, I will be looking back and will be relying on my memory and going by my memory it wont be that reliable!! I would also hope that this might act as a template for any future offerings that become available. Whilst I am trying to keep it as general as possible, I am using a recent syndicated opportunity as an example to help provide more context. The example I am using is here<link removed> (Sherbrook Road, Australia)[links to relevant documents are provided below].


Some Numbers

Here are some very initial numbers, in Table.1, I put together after a first look. This was a very quick first look with the aim to give me an idea of the investment.

TABLE.1 - A quick look at the numbers:

Purchase Price	$10,660,000
# of interests	135
cost per interest	$50,000
total Interests	$6,750,000	135 interests at 50K
Amount to borrow	$3,910,000
8% return per investor	$4,000
Rental per annum	$760,725
8% return all investors	$540,000
Mortgage repayment	$181,965	assuming interest only at 3.5% for 1 year
this to run property	$38,760
This would give me an LVR of	37%	=(3,910,000/10,660,000)
Gives a Gross Yield Of	7.14%	=(760,725/10,660,000)

NOTE: In the investment statement 8.14% projected pre-tax cash return the first full year ending 30 June 2017, so my estimates are close enough. I think the rental return figure I use is slightly off.

Below in Table.2 is a look at the actual numbers and the actual set-up costs involved.

TABLE.2 - A more detailed look at the numbers:

Purchase Price	$10,660,000
Stamp duty	$593,475
Other Issue Expenses (establishment costs - cost of raising capital, acquiring the Property and obtaining loan finance)	$864,245
Total	$12,117,720
Stamp duty % of PurchasePrice	5.57%	=(593,475/10,660,000)*100
OtherExpenses % of PurchasePrice	8.11%	=(864,245/10,660,000)*100
Total % on top of PurchasePrice	13.67%	=(8.11%+5.57%)*100
To be funded by:
Number of interests	135
Interest per Investor	$50,000
Subscriptions from Investors (135 Interests at AU$50,000)	$6,750,000	=(135*50,000)
Bank Loan	$5,367,720	=(12,117,720-6,750,000)
Total Price	$12,117,720	=(10,660,000+593,475+864,245)
Rental per annum	$760,725
This would give me an LVR of	50.4%	=(5,367,720/10,660,000)
Alt LVR	44.3%	=(5,367,720/12,117,720)
Gives a Gross Yield Of	7.14%	=(760,725/10,660,000)
Alt Gross Yield Of	6.28%	=(760,725/12,117,720)

NOTE: page 13 of the investment statement gives a breakdown of the Other Issue Expenses.



Now based on Table.2, for me to get my money back, disregarding the yearly % return ,this building will have to be sold for 13.67% higher than $10,660,000 which is $12,117,720 at some later date, and that is just to break even(I am assuming any potential purchaser would pay the stamp duty on top of this.) Whilst in the long-term this may be possible, it is very well worth highlighting!!! Is this just the price you pay for this type of investment? Are you better of to buy shares in a property listed trust, where you own pieces of multiple buildings? Would the same, if not similar fees be associated with that property listed trust? While the fees here might seem expensive, at least it comes across as transparent.

A look at the LVR and gross yield here, one could argue that there is an alternative here.

The 50.4 LVR is based on the loan/purchase price but why does this not include the stamp-duty and fees? Surely this should be considered from investment point of view? Maybe it is just purely from a banks perspective the LVR is calculated this way, but again it is worth highlighting the fees and stamp duty.

The same applies to the gross yield if you take into account the fess and stamp duty the gross yield is reduced from 7.14% to 6.28%. Again the 6.28% yield is more real to me, but I would be interested to hear other thoughts on this? And is this still a good yield in this day and age?

TO BE CONTINUED...

[Davo36]

Stamp duty? We don't have that at the moment do we?

[deepu]

Stamp duty? We don't have that at the moment do we?

Good point Davo. So this sydicated investment property in OZ compared with a NZ one would be less preferential because of the stamp duty factor? that seems fair enough.

But if buy over there with stamp duty and then when it comes to sell the new buyer pays stamp duty, very easy money for the taxman...
But if the underlying property value increases by X%, then it is still X% gain regardless of stampduty, or am I missing something here?

[donna]

Stamp duty varies depending on State - and it puts a big dent in your pocket or purse. e.g. you will pay over $21,970. in stamp duty on a property of $500K in Victoria. Less if you're in NSW $17,990. Queensland just $8770; South Australia - you're up with ViC on $21,330. The roading etc in VIC is really good though.

cheers,

Donna

[deepu]

tks Donna, but I still think I differ in that if the underlying property value increases by X%, then it is still X% gain regardless of stampduty, unless of course you include the stanmpduty in this X%.

The complete report is here that I did. I would appreciate any comments/thoughts. tks

[Bluecoat]

16% Capital + 8 % pa
better than your bank TD rates

https://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=12084425

[Davo36]

16% Capital + 8 % pa
better than your bank TD rates

https://www.nzherald.co.nz/property/...ectid=12084425

Good follow up, it did indeed work out well.

[Cousinit]

Stamp duty varies depending on State - and it puts a big dent in your pocket or purse. e.g. you will pay over $21,970. in stamp duty on a property of $500K in Victoria. Less if you're in NSW $17,990. Queensland just $8770; South Australia - you're up with ViC on $21,330. The roading etc in VIC is really good though.

cheers,

Donna

Once you get away from Melbourne out to the regions the roads are terrible. I should know , I live here .

Stamp duty is a killer though , couldn't disagree there . State Govt has done well out of us .