Although the majority of our projects are in the UK, we have offered various USA opportunities since the GFC in 2008. Our clients first took advantage of the crash in condo and house prices in Florida, and we followed this up with our Chicago Arlington Heights commercial property syndicate.
As we mentioned in our last newsletter, in conjunction with our USA partners, we are carrying out due diligence on several commercial properties in the Chicago/Illinois area. A number of our clients have expressed interest in the opportunity, and we thought we would explain how our USA syndicates are structured so that they protect the interests of all parties.
Our clients become members of an Illinois, USA-registered entity (LLC) and enter into a formal operating agreement, setting out the rights and obligations of all parties. We secure a mortgage for the property at a loan ratio not exceeding 65% and fix the interest rate if and when appropriate.
The syndicate runs for five years. However, after three years the property is revalued, and a vote is taken (St David does not vote). If at least 75% of the investors wish to exit the property, it is sold. Those who wish to remain have the option of buying out, at the valuation figure, those who wish to exit.
As the syndicate manager, we handle the day-to-day management of the project and oversee the USA-based property manager.
The net rental income flows through the LLC to the individual investors. This is distributed six-monthly in arrears and we arrange for the personal tax returns to be prepared and submitted for our clients.
St David enters into a profit share arrangement on the sale of the property so that all parties are incentivised to maximise the return from the project.
The aim of the syndicate is a secure and attractive income stream, which means we avoid more speculative opportunities where the returns may be greater, but so is the risk of under-performance or a capital loss. Accordingly, our syndicates may not appeal to every investor, particularly those seeking more aggressive double-digit returns.
Each opportunity is different, so the total investment required varies. The expected net rental income after the deduction of ALL costs and USA tax. This will typically be in the region of 6% to 7% p.a. depending on the property.
This article is for information purposes only and is not an invitation to the general public to participate in a St David private syndicate.