In the depths of the global financial crisis, in 2011, Auckland property syndicators Murray Alcock & Allister Knight had one particular syndicate that was going only one way: downhill. Others were shaky, at best.
6 years later, after Christchurch-based Taurus Group Ltd took control of the Aucklanders’ 9 syndicates, investors in that one are looking at daylight, the selldown of the SPI Group syndicates is otherwise almost complete, and Taurus is confident about its own future as a smallscale syndicator.
Taurus Group has 2 arms – its chartered accountancy business headed by Wayne Bailey; and a range of businesses which include capital-raising, property-structuring & syndication, headed by David Kitson (pictured above).
Property syndicate specialist Taurus Management Ltd, part of the capital & finance arm, said on Wednesday it had been granted a licence under the Financial Markets Conduct Act as a manager of managed investment schemes (excluding managed funds) to primarily invest in, or own, real property. It said it aimed to provide good opportunities for investors, mostly in the South Island.
Mr Kitson said the new licence gave the company wider scope to offer managed investment schemes to the public, in addition to the wholesale market. It is now one of 2 managed investment scheme licence holders in the South Island.
Taurus, the early syndication days
But back to the early syndication days of Taurus. In 2011, Taurus began advising SPI Capital Ltd on restructuring its $125 million portfolio of 15 properties in the office, retail & industrial sectors throughout New Zealand and, in 2012, SPI appointed Taurus to wind up the affairs of some of its syndicates.
Taurus has outlined, in an article on its website, its work in trying to deal with the 78 investors in a syndicate that owned a large industrial site in Papakura which had 5 industrial buildings in various states of tenancy & repair, the main tenant in liquidation, and a bank that wanted out.
Taurus persuaded the bank to continue its support rather than force a sale at a large loss, gathered a group of 5 of the syndicate investors willing to support a longer recovery with some extra capital, initially sold some roadfront property and is now moving to sell more of the land, and has negotiated longer-term leases.
Lesson learned: stay smallscale
Mr Kitson has distinguished between Taurus’s investment targets and those of the bigger Auckland syndicators such as Augusta Funds Management Ltd (owned by NZX-listed Augusta Capital Ltd) & Oyster Property Group Ltd (50% owned by ASX-listed Cromwell Corp Ltd, 50% by a group of 5 individuals).
Augusta, in particular, has gone for ever bigger investments and has won strong investor support.
But Mr Kitson said he learned from the SPI restructure & selldown not to get too ambitious and to hold syndicates below the $20 million level, thus requiring fewer investors.
Taurus now manages 4 syndicates with $45 million of property for a total 210 investors.
Mr Kitson said Taurus had seen money flow north to the big syndicators’ offerings, but he believed there was also a strong future in smaller syndicates, and in the South Island: “We see this as complementary to the larger syndicate managers, as the maximum individual property size we will manage is unlikely to be greater than $20 million. There are plenty of attractive opportunities in the south, with very good returns & security. And when it comes to syndicate investment, size does not necessarily matter – tenant profile, returns & security do, so it’s all about the opportunity.
“The syndicates we offer will always have fewer investors, meaning we can continue to provide personal service where investors are bigger fish in a smaller pool. We know it builds confidence to have personal & direct access to the syndicate manager.”
New licence gets Taurus Management focused
Gaining the managed investment scheme licence – a 15-month process – has meant Taurus has had to realign its business to ensure Taurus Management can grow entirely separately from its sister company, Taurus Group. Said Mr Kitson: “The new licence provides the opportunity for the company to start planning a wide-ranging portfolio in the mid-range boutique investment sector over the next 5 years.”
Through the wholesale market, the company recently settled on 9 childcare centres, mostly in the South Island, and is undertaking due diligence on a 10th centre. That scheme will soon own properties worth $25 million.
Taurus Management has also settled the purchase of a 4000m² factory & warehouse in Dunedin, where a sale & leaseback arrangement gave investors the opportunity to be part of a small boutique syndicate with a single very successful tenant. “With monthly cash distributions of 8.5%, the syndicate compares very favourably with larger opportunities in the north,” Mr Kitson said.
Taurus is also conducting due diligence on 2 Christchurch properties, with more opportunities in its sights: “There’s plenty coming up and, while the South Island is our focus, we are also considering forays into regional centres in the North Island, as long as the opportunity is right.”
Taurus Management’s chief financial officer, Michael Kohing, has been with the group since 2000. The company added a distribution manager, Andrew Dorgan, early this year after Mr Dorgan returned to Christchurch from client management & sales roles at 3 banks in London over 7 years, and 5 years in Melbourne as Westpac Banking Corp’s public sector banking team relationship director.
In June, commercial property & investment specialist Charlie Goodwin joined Taurus as a non-executive director. His career has included 6 years as head of investments & marketing for Perpetual Trust, 5 years as a director of Mainland Capital Ltd and, in the last 2 years, work as a consultant providing business case studies and appointment in August as general manager of Ashburton family investment company Tricroft Properties Ltd.
Links: Taurus Group
Taurus, Hunua syndication article: Commercial property – delivering equity growth & dividends, post-GFC
15 April 2016: Taurus Group restructures
11 November 2014: SPI directors Alcock & Knight give undertakings to FMA, including repayment
19 October 2012: SPI investors vote to stick with Highland Park cinema property
31 August 2012: Investor majority decides to terminate SPI’s Gloucester syndicate
22 August 2012: SPI Capital manager strikes short-term deal on one syndicate, calls vote on a second
20 April 2012: Syndicator concedes no return to investors in 2 accommodation syndicates 4 years after tenant Edpac’s collapse
Attribution: Company release, website, Companies Register.