SYNDICATES

A syndicate is a group or association or combination of individuals who join together to pool funds and conduct a common venture such as real estate development. Generally, they are investors only, leaving the syndicate to by run by an expert manager. The syndicator brings together the capital of several participating investors, selects the property for acquisition, operates and manages the business affairs of the syndicate and handles the ultimate disposition of the property. A separate syndicate is usually created for each property and may be private or public. The syndicate can operate either through a company or a partnership.

EXAMPLE

Suitable development land is acquired by the syndicate. The syndicator then organises the group or alternatively, organises the syndicate first arid then, locates the property.

ADVANTAGES:

• reduced management problems being a small group.
• share in ownership, therefore members can share any capital gains.
• limited liability, if a company and shared liability if a partnership.
• certain investment advantages such as "leverage" and "gearing" and "negative gearing".
• spreads risk over all syndicate members.
• ability to invest in a larger building than would otherwise be possible as a single investor.

DISADVANTAGES

• no organised market for each member's interest.
• no benefits in a development project until completion.
• large syndicates can be complex to analyze for example, the developers of Grosvenor Place, Sydney.