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  1. #1
    Join Date
    Jun 2013
    Posts
    1,980

    Default Augusta's offer of Telecom House

    What are the negative aspects of this sort of investment?

    I'd imagine getting your capital out (selling your $50k share) is pretty much next to impossible, but maybe I'm wrong about that. Any ideas?

  2. #2
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    8,377

    Default

    Mate this is all about a bunch of rich guys making a bunch more money selling this thing to the little man.

    Did you see the valuers report said it was over rented?
    Squadly dinky do!

  3. #3
    Join Date
    Jun 2013
    Posts
    1,980

    Default

    Nope - not seen any prospectus yet, but in my googling I did see your blog article. If it's over-rented, aren't Spark now locked in for a decade?

    So anyway, how DO you sell a share in this sort of thing, down the track a bit? It's not like the sharemarket, but it is a share in the ownership. Are you forced to place a TM ad? :-)

  4. #4

    Default

    Yes, but what happens to the value after the ten years if rents decrease?
    Some syndicators have a secondary market but no idea what fees are like or how easy it is to actually sell, otherwise you wait for majority of shareholders to sell

  5. #5

    Default

    I don't do these, primarily due to fees and liquidity.
    They do seem to sell OK however.

    Augusta's new cash cow

    Augusta launches a whopper
    Last edited by speights boy; 28-08-2014 at 07:27 PM.

  6. #6
    Join Date
    Mar 2007
    Posts
    122

    Default

    Liquidity is the main issue. Almost impossible to sell your share.

    The syndicator makes money - fee to form the syndicate and ongoing management fees.

    Caution advisable...as with any investment!

  7. #7
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    8,377

    Default

    I got all the info on it, man the syndicators earn fees for everything.

    If something happens with that property, like the wind blows past it, they earn a fee.
    Squadly dinky do!

  8. #8
    Join Date
    May 2005
    Posts
    50

    Default

    Single Tenant Risk.
    No or little liquidity if you wanted to sell.
    High Fees.
    High Gearing - Over 40% which is the rule of thumb for Listed Property Companies.
    Relative low return compared to Listed Property Companies like Goodman Property Trust and Argosy Property.
    Low Transparency compared to Listed Property Companies.

    I don't know why anyone would enter into an investment like this....

  9. #9

    Default

    The management company's shares have gone up recently on the NZX.
    Also they have just increased their dividend: the first time in a while.

  10. #10
    Join Date
    Dec 2010
    Location
    Cambridge, NZ
    Posts
    1,375

    Default

    Quote Originally Posted by Leftette View Post
    Nope - not seen any prospectus yet, but in my googling I did see your blog article. If it's over-rented, aren't Spark now locked in for a decade?

    So anyway, how DO you sell a share in this sort of thing, down the track a bit? It's not like the sharemarket, but it is a share in the ownership. Are you forced to place a TM ad? :-)
    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.


 

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