6th Augusta Property Syndicate

Hi,
Was reading about the afforementioned on the buisness section of the Sunday Tribune and decided to check it out some more. At the moment I am dabbling with the idea of investing in it, the main reason being the high projected rental yields of 7.5% p.a. (I realise that the company will offset some of the rental payments against the interest on the bank loan). Costs for me seem to be an initial 3% and 0.75% per anum. I would be investing the minimum of 50K. Also the only investments I have at the moment are 100% stock market orientated so I would like some property exposure. If I am to invest in property I rekon that commercical property in Germany might be reasonably sound. One issue I have with it is the description of it as a low to medium risk investment. Surely any leveraged product should be considered medium to high risk. For anyone who is interested in having a look here is the link.
[broken link removed]

One other question, I am fairly green when it comes to investing and I have never actually sat down with a financical advisor until today. I looked up a list of independent financical advisors on the financical regulators web site and got in contact with a mortgage/pension and investment broker for my area. I got him to have a look over the afforementioned product and he said it was reasonably good investment for someone who had a medium to high risk investment strategy. He also showed me some other similar products which friends first and a few others are offering. When I asked him how much I owed for his services he said that the way they operated was that I could invest in whichever product I chose through them (including the Augusta syndicate) by simply paying him the initial 3% outlay instead of the nominee company.
My question is does this constitute independent financical advice??

Maybe. But that doesn't mean it's good advice. Beware of investment vehicles bearing high commissions and dodgy marketing terms like "syndicate".

True independent advice should be a flat fee, for example €250/hour rather than a % based fee.

For example, if an investor was investing €5m - then 3% would be €150,000, does this sound like a realistic fee for investment advice?Of course not.

Independent advice should be a flat fee - otherwise there is a clear vested interest to encourage an investor to invest as much as possible.

I would also be wary of a mortgage/pension/investment broker...that is a lot of very different areas to be specialist on!

Nomansland said:

When I asked him how much I owed for his services he said that the way they operated was that I could invest in whichever product I chose through them (including the Augusta syndicate) by simply paying him the initial 3% outlay instead of the nominee company.
My question is does this constitute independent financical advice??

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In a lot of cases, it is not possible for an individual investor to invest in a fund without paying the standard commission. Where someone approaches the fund provider directly, they just charge the same commission rate they would if the business was introduced through a broker, but pay it to themselves.

If you are getting fee-based advice, where an adviser is charging you a fixed fee or hourly rate, make sure you check if the adviser can get you a rebate of the normal commission. If you don't, while you may be getting unbiased advice, you may effectively end up paying twice.

gonk said:

In a lot of cases, it is not possible for an individual investor to invest in a fund without paying the standard commission. Where someone approaches the fund provider directly, they just charge the same commission rate they would if the business was introduced through a broker, but pay it to themselves.

If you are getting fee-based advice, where an adviser is charging you a fixed fee or hourly rate, make sure you check if the adviser can get you a rebate of the normal commission. If you don't, while you may be getting unbiased advice, you may effectively end up paying twice.

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I have never found this to be the case.

I have found that with a number of funds, if an investor goes direct they will of course pay the commission (the promoter keeping it in such a case).

However, in all cases, it has been possible to negotiate that the investor's commission goes into their investment "pot of money" if the investor has asked for a fee-based nil-commission arrangement through a fee-based adviser.

South said:

I have never found this to be the case.

I have found that with a number of funds, if an investor goes direct they will of course pay the commission (the promoter keeping it in such a case).

However, in all cases, it has been possible to negotiate that the investor's commission goes into their investment "pot of money" if the investor has asked for a fee-based nil-commission arrangement through a fee-based adviser.

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That's fine, as long as the investor is aware that investing directly does not automatically mean they will not incur commission and clarifies the situation prior to making the investment.

If you do not seek this clarification and make sure you agree a rebate of commission in some form, it is quite likely you will end up paying commission, even though you think you're investing on an execution-only basis.

gonk said:

That's fine, as long as the investor is aware that investing directly does not automatically mean they will not incur commission and clarifies the situation prior to making the investment.

If you do not seek this clarification and make sure you agree a rebate of commission in some form, it is quite likely you will end up paying commission, even though you think you're investing on an execution-only basis.

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Agree with you 100% on this.

But every fund can be accessed on a 0% commission basis, and do not trust any adviser who would have you believe otherwise!

If you want to know more about the company ask them for details about how well the other 5 are doing.
I invested in the fourth with Augusta. I went throught it in detail with my accountant. Like you I was attracted by German commercial property. Also, it is the same guy who did the forrestry funds some time back which I thought were a good idea. They have a german guy as one of their directors who does their negotiating over there which has it's advantages. Meet them in person with a list of questions and take your findings to an verified 'advisor' when you find one.
As for getting independent advice, I generally vet things with my accountant as it is hard in this country. If someone told me they were independent I would nearly make them take an oath on it - Definitely check them out to verify their claims.
best of luck

Thanks for all the reply's which have been very helpful. barryo, how long is the 4th fund up and running and are you pleased with its performance to date?

I'm glad someone else pointed out the connection with the forestry funds. There is a thread on these boards where the forestry people declined to answer some very basic questions about their funds. Perhaps someone else can find the link.

barryo said:

I invested in the fourth with Augusta. I went throught it in detail with my accountant. Like you I was attracted by German commercial property. Also, it is the same guy who did the forrestry funds some time back which I thought were a good idea. They have a german guy as one of their directors who does their negotiating over there which has it's advantages.
As for getting independent advice, I generally vet things with my accountant as it is hard in this country. If someone told me they were independent I would nearly make them take an oath on it - Definitely check them out to verify their claims.
best of luck

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Is the same guy that chooses forestry investments choosing suitable commercial properties in Germany?

SPC100 said:

So it seems, 42% of your original investment will be actually be eaten by known & disclosed costs associated with the project i.e. 27% + 15% (3%*5 years).

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This sounds very dramatic, until you compare it with a "traditional" buy-to-let investment in, say, a €350k apartment.

Purchase price €350,000.00
20% deposit €70,000.00
Stamp duty €21,000.00
Legal costs (1% + VAT) €4,235.00
Management charges @ €1,300 p.a. x 5 €6,500.00
Insurance @ €250 p.a. x 5 €1,250.00
5/8 of €10,000 fitout depreciated over 8 years €6,250.00
Rental agency charge @ €1,200 p.a.€6,000.00
Total costs over 5 years €45,235.00
Costs as percentage of initial investment (deposit + s.d. + legal) 47.50%

I've estimated costs at "typical" levels, based on my own experience. I know you could handle the rent yourself, but to compare like-with-like, as the Augusta investment is "hands-off", I assumed an agency handling lettings, collecting rent, etc.

The point is the costs as a high percentage of investment come about as a result of the gearing - not because the Augusta fund's charges are exceptionally high. There are ungeared property funds on the market for investors who are uncomfortable with this level of cost and risk. The potential gains are naturally lower too though.

The 4th is not even a year old, but I am told it performing ahead of prediction due to an expansion been allowed at the Hanover hospital which was hoped for but not factored in initial estimates.

It should be noted I wanted a geared investment, which comes with increased risk. I also wanted something hands off. This was also recommended to me by a source which I trust.
Understand the costs for your peace of mind, but as was already explained, this can as expensive to do it yourself not to mention the hassle and time (which I dont have).
South - If you read my earlier post you would have seen the properties are sourced by a German National who is a director.
I am not going to try to defend this to some who have little information on it and seem suspect et al.
Their website is [broken link removed] The risks, costs, the lot are detailed in each offer document under the media link.
To some I say read it then comment. I exclude those who put some genuine thought into their comments.
This type of investment is not for everyone but I was happy with it's structure and had professional advice. Please get advice to see if it fits the bill for you.

barryo said:

South - If you read my earlier post you would have seen the properties are sourced by a German National who is a director.

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No you said he does negotiating over there, does that mean he is the property picker?

Does he have a good property track record, or is he just there because he's German and it invests in Germany?

Thanks for all the input which has been of great help.

I sat down last night and done all the Maths on their charges, projected rental yields, forecasted intesrest rate for repayment, tax payout on rental yeild etc. etc. I don't have time to post it all up now but will do so tonight. However in summary, assuming I have done the Maths correctly (which might be a big if!!) after all expenses deducted and net rental payed back into fund after the 5 years the property would need to appreciate by 6.1% (compounded) per anum for an initial 50K to yeild 97K after 5 years before CGT is applied. (note this is the projected yield that they have stated). This sort of projected appreciation on commercial property seems quiet high and I am not so sure that its capable of it. I would need to research this some more.

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Right, here are the calculations as promised. Please feel free to point out any mistakes as I am fairly inexperienced at all this craic.

Inital cost of aquiring propertys = 8.65% of cost of buildings.
Inital 3% commison charge on 50K investment.

Inital investment from me = 50,000
Gearing of 80/20 from bank=200,000
Total investment(my share) = 250,000

Lets say cost of Building(my share) = 230,000
8.65% cost of aquisition = 20,000
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Total cost of aquiring building=250,000

Annual 0.75% managment fee(0.75% of 250,000) = 1875 x 5 = 9375
Annual 0.3% owners maintenance charge = 750 x 5 = 3750

Total costs = 20,000 + 9375 + 3750 = 33125.

1st years rental income = 7.5% of value of property, Rental income increases 2.5% peranum there after.
7.5% of 230,000 = 17250
Minus 2% charge = 345
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16905

Interest repayment on loan = 5.7% of 230,000 = 11400
This interest is subtracted from rental income

16905 - 11400 = 5505. This rental income is then taxed @ 26.375%
26.375% of 5505 = 1452. Therefore total net rental for year 1 is 5505-1452 = 4053.
I have calculated net rental yields from years 2,3,4&5 the exact same way except I have factored in the assumed 2.5% increase in the inital rental income figure per anum.
My figures work out as follows,
Year 1 = 4053
Year 2 = 4364
Year 3 = 4683
Year 4 = 5010
Year 5 = 5344
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TOTAL = 23454

So now,
Total investment(bank + my own) = 250,000
Minus costs(inital + per anum) = -33,125
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216,875
Minus inital 3% on my 50K = -1,500
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215,375
Add net rental income = +23,454
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238,829
Minus principle of 200K loan = -200,000
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38,829

So after all costs and interest repayments have been deducted and net rental yields added in I am left with 38,829 of my inital 50,000 investment.
They have stated that it is reasonable to expect a return of 97,983 (before CGT is applied) on an inital investment of 50,000.
So I am short 59,154 (38,829 + 59154 = 97,983). To make up this shortfall It would require the final value of my share of the property to be to be 309,154. This value of 309,154 minus the inital value of 230,000 makes up the 59,154 shortfall.

So in summary the for my share of the property to reach this value, the property would need to see 6.1% appreciation compounded per anum to realise a final value of 309,154. I really don't know if this is feasabile!!

Why dont you go through your figures with them (Augusta) to test their calculations. I see a couple of things here, but this is not the place to debate them (Mainly due to the time needed).

For your own information, take these figures to someone who gives professional advice and go through them with them.

extopia said:

I'm glad someone else pointed out the connection with the forestry funds. There is a thread on these boards where the forestry people declined to answer some very basic questions about their funds. Perhaps someone else can find the link.

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Hi

The chap your thinking of is Declan Kennedy, he established the Forestry Funds many years ago, won a notable award for the concept at the time etc.

As I have it, he has absolutely no invovlement with the Forestry Funds these days, having sold out his interest several years ago.

He's a very open guy, give him a call at Augusta & have a chat with him on his background, the info published in the marketing etc.

I'm suprissed this has not been mentioned already, but in addition to having a German national as a director to help with language issues etc the Augusta team source all their properties in conjunction with Colliers International (as in Colliers Jackson Stops fame) ....

Come on guys, read the info available here

Best of luck to anyone investing in this fund. Based upon other similiar style funds being offered around (ie German Commercial Property Syndicated Funds), such as Friends First Oyster Fund which his now full, the funds offered by the firm of Accountants in Cork (sorry name escapes me, CCI or something perhaps ?) etc the returns projected appear in line.

I think a vital point to note with all syndicate investments is how they will be managed, proactively (i.e. attempts to renegotiate leases, increase density, get new tenants into vacant units, get planning & perhaps build more units etc) is vital to the return .... as against a passive manager who purely sits on the asset & collects the rent each quarter / month

Cheers