Competition between property syndicator Oyster Group and its biggest rival Augusta Capital is set to intensify thanks to Oyster's tie up with ASX listed Cromwell Property Group.
Oyster is a privately owned company that manages 24 property syndicates with a combined asset value of $343 million and a separate $315 million property portfolio on behalf of institutional investors.
Brisbane-based Cromwell is a similar but much larger company, managing property funds with a combined value of around $1.2 billion and a separate investment property portfolio worth about $2.3 billion.
Cromwell acquired a 50% stake in Oyster in June and the benefits of that arrangement are already becoming apparent with Oyster fully underwriting its next property syndicate.
Underwriting allows syndicators to make unconditional offers on properties and to settle the purchases before they are fully sold down to their syndicate investors.
There is keen competition between institutional investors for commercial properties suitable for syndication, and being able to make an unconditional offer and offer a relative short settlement timeframe will give a potential buyer an advantage over others that can't offer the same terms.
Underwriting its syndications is a card that NZX-listed Augusta has played often, mostly recently with the syndication of the Spark headquarters building on Victoria St in Auckland's CBD.
It's an advantage Oyster will also start exploiting, thanks to its tie up with Cromwell and the access to capital that provides.
Details under wraps
Oyster is about to syndicate a large industrial building leased to Cardinal Logistics in the Auckland Airport industrial precinct.
The details of the offer are under wraps until the prospectus is released but Oyster chief executive Mark Schiele confirmed that Oyster was underwriting the offer.
It was necessary because the vendor wanted a short settlement that would not have left enough time to register a prospectus and promote the syndicate to investors and sell it down, he said.
But Oyster would not automatically be underwriting all of its new syndicates.
"There will be horses for courses. We don't necessarily want to underwrite where there is no need to," Schiele said.
And from an investor's perspective, there may be a good reason not to.
Underwriters charge a fee for their services and property syndicates can be comparatively expensive to set up relative to the size of the investment.
Adding an underwrite fee to those costs will reduce the syndicate's net asset backing even further, potentially making it less attractive to investors.
Schiele wouldn't say how much of an underwrite fee Oyster would be charging in its latest offer, saying that would be revealed in the prospectus, but he did suggest it would be less than his competitors have charged recently.
There are two other areas where Oyster's tie up with Cromwell could start to tread on Augusta's toes.
It will allow the company to syndicate larger and more valuable properties than it has in past and will also assist it to package up Australian properties for New Zealand investors, both areas in which Augusta is already active.
Oyster doesn't have any Australian properties lined up for syndication on this side of the Tasman yet, but it was something the company was looking at, Schiele said.
It would have them managed by Cromwell's property management arm, rather then setting up its own Australian property management operation.
"We are not looking to set up a kingdom over there," Schiele said.
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