What is a Property Limited Partnership?
Property Limited Partnerships are used to combine each investors funds to provide a larger amount of capital to acquire an investment property.
Who can invest with us?
Experienced investors or investors who have qualifications that enables them to fully assess the merits of the investment based on the information we provide; or
High net worth investors that have net assets in the last two years of more than $2M or have held or invested in investments of more than $1M in the last two years; or
People who invest more than $750,000; or
Relatives and close business associates of our Director’s;
What information will I receive to assess the property?
We prepare an Information Memorandum for every property we purchase. This typically contains detailed information about the property including the location, number and quality of the tenants, valuation, lease events including potential asset management initiatives, planned capital expenditure together with a five year cashflow. We welcome any further questions you may have about the information provided. It is important that you have all information available, to enable a considered and informed decision to be made.
What is the projected cash return?
A regular monthly cash distribution on the capital invested is paid to the investor. The projected cash distribution pre-tax is set out in the Information Memorandum and cashflow. The projected returns do not include any allowance for capital growth.
Who manages the property and tenants?
DABS Consulting Ltd is contracted under a Management Agreement. This ensures high standards are maintained including rent collection, maintaining and servicing the building, accounting and liaising with the investors. We have considerable experience in property selection and management and have other expert resources to call upon if required.
What are the likely fees, expenses and costs?
Fees are detailed in the cash flow forecast and the Management Agreement. There is an establishment fee that covers the finding and securing of a property, valuations, due diligence, anti-money laundering, building reports and setting up the Limited Partnership.
What are the risks?
We put a comprehensive building insurance policy in place. However, the nature of commercial property means that there are risks that need managing which include movements in bank interest rates and a tenant leaving a property, which are not insurable events. When we prepare a cashflow pre-purchase, we forecast likely movements in interest rates in our modelling. We also plan for tenants vacating premises at lease expiries or if they are in financial difficulty. We are very experienced in managing these situations, however it is not always possible to predict them.
How do I sell my investment?
Partnership shares can be on-sold at a property valuation determined each year less a handling commission of 2% of the sale price. First option to purchase shall be given to existing investors then to new investors. It is common in property syndicates for the remaining partners to buy out a departing partner. If this happens it can be a relatively quick and simple process. There is a secondary platform for selling your investment if existing investors choose not to purchase. Our investments are intended to be long term. However, the property can sold if greater than 75% of the investors agree to sell.
What are my tax obligations and what reports do I receive?
A Limited Partnership is a simple structure which has two important features. A partnership is not taxable income. Rather the proportionate share of the income is passed directly to the investor and they look after the taxes in their own returns. All investors have their own specific tax requirements. Secondly a Limited Partnership is similar to a Limited Liability company, where the partner’s liability is limited to the capital invested.
Therefore, after the end of each financial year, being 31 March, financial accounts are prepared for the Partnership. The taxable share of each partner's income is detailed in these. The investor is responsible for completing a tax return as an individual, a trust or a company.
An overseas investor is required to pay tax in New Zealand on this income. If this is your only New Zealand income your tax rate is likely to be 17.5% or 33% depending on your structure. We are happy to discuss this with you. If your tax resident country has a Double Taxation Agreement in place with New Zealand, it is likely you will need to declare this income in your own tax return and will receive a full credit for any taxes paid in New Zealand. However, it is important to discuss this with your financial advisor. We do not purport to have any expertise in foreign tax regimes.
Who should I speak to?
We recommend you seek independent financial advice before making your decision.