Pacific Property Fund set to become a super syndicate as it buys up assets from other syndicates

By Greg Ninness

Tauranga-based Pacific Property Fund (PPF) is looking at turning itself into a mega property syndicate by acquiring the assets of two other property syndicates.

To do that, and to build an extension to one of its existing properties, PPF is looking to raise $15 million from the public by way of a share offer.

PPF is a property syndicate that like most syndicates, was originally set up with a single asset, an industrial property at Mt Maunganui which is leased to garden supplies company Tui Products.

It has since acquired two additional properties, an industrial building at Druces Road in South Auckland and another industrial building in Hamilton.

It is now looking to acquire two further properties, a suburban office building at Mt Eden in Auckland and an office building at Henderson in West Auckland.

PPF was established and is still managed by Tauranga-based property syndicator Property Managers Group.

The two Auckland properties PPF is now looking to acquire (at valuation) are currently owned by syndicates which are also managed by Property Managers Group.

So it appears that PPF is becoming a vehicle that acquires the assets of other syndicates managed by Property Managers Group, allowing them to be wound up.

A bit unusual

This makes PPF a bit unusual in the syndication market because it is a syndicate that owns multiple properties and because it acquires its assets from other syndicates managed by a related party.

And although it has the word "Fund" in its name, investors should have no doubt about what they are investing into.

As the Product Disclosure Statement makes clear, "PPF is not a managed investment scheme for the purposes of the Financial Markets Conduct Act."

Investors will be buying ordinary shares in an unlisted, limited liability company, with multiple property assets.

One of the concerns investors in unlisted companies and other types of syndicates often have, is their ability to cash up and exit the investment after a certain period of time.

Like most syndicates, PPF does not offer a redemption facility and because its shares are not listed on an exchange, investors wanting to cash up are reliant on being able to sell their shares privately when they want their capital back.

When investors want to sell their shares, Property Managers Group will try and find a buyer for them from its own database of investors, but of course there is no guarantee that it will be able to match up someone wanting to sell with someone wanting to buy at any given time.

Plans to buy more properties

According to PPF's Product Disclosure Statement, it is part of Property Managers Group's strategy for the company to acquire further properties in the future.

That could create a delicate balancing act for the company as it tries to attract new capital from investors to fund new acquisitions and meet the needs of any investors wanting to cash up and get their money out at the same time.

If PPF does purchase additional properties, it will be interesting to see how many, if any, will be acquired from other syndicates managed by Property Managers Group, allowing them to be wound up.

PPF is structured as a PIE entity, which may have tax advantages for some investors, and is targeting a gross dividend yield of "approximately 7.5%" in the year to March 2018.

The minimum investment is $20,000.

You can read the Product Disclosure Statement for PPF by clicking on the following link:

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