Investors look towards property syndication as equities take back seat

PROPERTY syndication is becoming increasingly popular among investors, a breakfast seminar was told in Cork yesterday.

Kevin Warren of Warren Private Clients, which has €1.5 billion invested in property across the globe said people have moved away from traditional forms of investment such as equities, due to their poor performance in recent years.

However, he noted tax-based syndication deals will be scarce in Ireland after July 31, 2006. By then, many tax schemes will expire on foot of the review of such schemes initiated in Budget 2005, by Finance Minister Brian Cowen.

Mr Warren was speaking at the briefing organised by Cork-based solicitors, Ronan Daly Jermyn, entitled Property Syndication - Current and Future Trends. He is a director of Warren Private Clients whose property portfolio is spread across Ireland, Britain, Europe and the US.

Head of tax at Ronan Daly Jermyn, John Cuddigan discussed the changing priority of tax structuring in property syndication.

“The looming expiry date for many incentive schemes will spell the end of traditional tax incentive schemes,” he said. With those type of investments commercial return was secondary for the investor. In the past, the availability of tax allowances from the underlying property was the key attraction for lots of investors, he said.

By contrast, the main focus of syndicates will be to achieve a commercial return through income and capital appreciation with tax structuring being an important factor in achieving that,” said Mr Cuddigan.

The move towards syndication by investors offers greater potential all round, he said. As investor focus veers towards syndicated investments, a dual opportunity for developers to create a new market, particularly for higher value properties, will emerge, he said.

Opportunities will also arise for existing businesses to free up cash by looking at sale and leaseback transactions, he said.

“In the latter case, the investor will achieve a commercial return through a guaranteed rental income, and the selling company frees up cashflow for future investment in their business or to settle a business succession issue,” said Mr Cuddigan.

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