The syndication of commercial property - how it works

Syndication - a brief explanation of how it all works in practice

The broad outline of the syndicated arrangements as provided by Helmsley is as follows:

1. Helmsley Securities Limited and two Practising Solicitors (as Trustees) will hold the freehold title of the property as Bare Trustees.

2. On completion of their purchase syndicate members become beneficial owners, as tenants in common, and can fully identify their ownership, by way of a Trust Deed;

3. The Trust Deed provides for the syndicate members to be in control of the management of the property and for the rental income to be remitted to the syndicate members in accordance with their level of participation;

4. Under the Trust Deed during the initial period (the period between the date of purchase and the date of the next rent review) to ensure a medium term investment and, at the same time, give some flexibility, a syndicate member may not trigger the disposal of the entire property but may sell his syndicate share. However, there is provision that, in the event of:

the death of a syndicate member;

the liquidation of a syndicate member, should that be a body corporate;

or in the case of a death of a beneficiary of a pension fund

then that syndicate member or his personal representative can demand of the Trustees that the whole property is marketed in the best possible way. The Trustees will then have two years in which to sell the property.

5. After the initial period, any syndicate member has the right to demand that the Trustees dispose of the entire property on the open market. The Trustees will then have twelve months in which to sell the property.

6. All documentation is made available to the intending purchaser and their solicitor.

The investments that are made available from time to time are normally concentrated on small to medium size retail premises, offices and factory units. Full repairing and insuring institutional-type leases are generally a pre-requisite. The location and type of property is carefully vetted and only properties with either "blue chip" or sound private tenants are normally offered.

Prudent property investment should not be of a speculative nature and investors should appreciate that the real value of property and its underlying security lies not only in its quality and position but, equally, in the standing of the tenant and the terms of the lease to ensure that it provides a dependable source of revenue, with potential for capital growth.

These arrangements, therefore, as far as practically possible, give:

• direct investment in property: in many cases, with "blue chip" public company covenants;
• complete control of the disposal of the property from the expiry of the initial period;
• the opportunity to fully investigate the purchase before syndication.