Money@Work
Friday 3 April 2009
Each week ShareChat reviews a current savings and investment product. Recently it put a commercial property syndicate, Arran Court, through its paces.
What is it called and what sort of savings product is it?
Arran Court is a proportionate ownership property investment.
Who is the company behind it?
Investors buy, through this scheme, a portion of the real estate being used for a rest home in Te Atatu. There are 80 freehold equity parcels in total. The offer is being promoted by real estate firm Colliers and the actual land which investors buy is being leased to Radius Asset Management which manages aged care assets worth more than $53 million.
Who is the target market?
The growth in syndicates and proportionate ownership schemes like this tend to appeal to conservative investors who are disillusioned with term deposits at the moment. What return does it offer?
The scheme is projecting a 9.3 per cent cash return. When was it launched?
The offer opened last month and is likely to stay open until all the parcels are sold. What other products is it like or is it competing with?
Property syndications are currently becoming more popular and several are, or have been, on the market recently. These offers tend to compete with term deposits – which some may find surprising. Is it long term, short term or medium term?
This is a long term investment with a term which is around 10 years. What is the unique selling point?
A couple of key points make these types of investments attractive. One is the interest rate – it is far better than what a bank will give on a term deposit. The second is that the income is paid monthly, as opposed to many fixed interest investments which are either quarterly or every six months. How strong a stomach do you need for it?
While these sorts of investments look to be low risk, the risk is higher, hence the interest rate being paid. What's the hitch?
Key issues to consider are that once you are into a scheme like this you are pretty much locked in until the end. While there is talk of secondary markets, actually selling an interest at face value during the term is not particularly likely. Secondly there needs to be some sort of exit strategy for the property. What is going to happen when the term is up? The answer is no-one has any idea this far out. Thirdly, the starting point is quite high. With this scheme the minimum is $50,000.
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