Self-managed super fund property investment

All trusts have a fixed term – usually six or seven years – which is set out in the disclosure document. At the end of the term an Exit Offer is made to investors, giving them the chance to exit at a nominated exit price, determined by the trustee in accordance with the deed (Fair Value). If 75% or more elect to exit, the trust is wound up. If less than 75% wish to exit, buyers are found for their units at the Fair Value. Priority is given to existing unitholders to purchase the units at the sale price. If units remain unsold after six months, the trust is wound up.

If Investors do not vote to wind up the Trust at the Exit Offer, the trust will be extended for a time recommended in the report accompanying the Exit Offer. Essential Services Trust 1 will have a provision for annual minor liquidity events, if the trust continues after the Exit offer. These Limited Redemption offers will be for a specified number of units at Fair Value, up to 5% of the trust. Any redemption offer will be sent to all Investors and be subject to the trustee being satisfied that the offer is in the interest of all Investors.

SMSF trustees invest in property syndicates to obtain reliable regular income payments, while protecting their capital from inflation.  Property syndicates provide regular income from monthly rent payment from tenants in commercial properties.  With annual rent increases, the value of the properties rises over time, keeping pace with inflation.

There are some important contrasts:

• The syndicate is professionally managed, so you do not need to be involved in hiring managing agents, leasing decisions, capital expenditure decisions, and owners’ corporation meetings.
• Capital expenditure is allowed for by the manager, so you will not need to come forward with more money to upgrade the property.
• If there is a loss, your downside is limited to your investment, whereas in a geared residential investment, the lender has full recourse to your other assets.
• Commercial properties are not subject to residential tenancies legislation, which limits the field of action of the landlord.
• While residential property leases are for a maximum of one year, with a market rent review each year, commercial property leases are longer – sometimes longer than 10 years – and have fixed or CPI increases each year, giving greater certainty of income.
• Dealings with commercial tenants are based on business principles, whereas dealings in relation to the principal place of residence of a tenant can have an emotional overlay.

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