Oyster offers supermarket shares

Property syndicate Oyster Group is selling a close to $5 million stake in a Papakura Countdown supermarket.

Oyster Group director Mark Winter said 48 shares of $100,000 were being made available to the public as the group looked to grow its portfolio of 25 syndicates.

The supermarket was on a 8,427m2 standalone site, which meant it did not have the associated fees and levies associated with shopping mall-based supermarkets, he said.

“This opportunity offers a high level of security to investors, given that regardless of economic times people still need to buy groceries,” said Mr Winter.

The refurbished supermarket had a 16-year lease in place that expired August 2020, with five, 6-year rights of renewal and the supermarket tenant had a proven trading history.

The offer would be fully managed by Oyster Management with cash returns paid monthly to investors.

Oyster Group’s portfolio included Countdown supermarkets, Westpac’s Hamilton building and Noel Leeming’s Botany Downs site in Auckland.

A recent syndicated purchase of $7.79 million commercial premises located at 102 Rosedale Road, Albany, structured as a proportionate ownership scheme, was oversubscribed.

Oyster Group is part of Prime Retail Management, which manages the Dress-Smart chain.It was set up by five ex-Bayleys Real Estate agents to specialize in commercial property management and proportionate ownership properties.

Spotlight on property syndicates

Property syndicates have had a chequered history in New Zealand and swung back into fashion after the commercial property market crashed – causing the Securities Commission to increase its scrutiny of their operations last year.

Property syndicates, or proportionate ownership schemes, are designed to give smaller investors the chance to buy in to commercial property that would normally be reserved for corporates or wealthy individuals.They often use leverage, typically borrowing 30-50% of the purchase price of the property.

Besides investor payments, rent received must also cover taxes, levies, bank debt, building maintenance and property management fees.Yet they still manage to offer returns of sometimes more than 10% for investors.

One problem is the lack of liquidity for investors and exiting a scheme requires the sale of the property or finding someone else to take over their portion of the syndicate.