Syndicated Property SIPP

Background

Darren is a partner in the Bournemouth-based Christian literature bookshop, Keith Jones Bookshop. His current investments include a traditional pension scheme with CGU and a 10/20 investment plan with the Prudential. Darren is 33, married with young twins. He is a
keen investor who is looking at long-term investments for his family.

Problem

During an annual review of his existing policies he discovered that both schemes were underperforming. Darren is considering cutting his loses and utilising the lump sum currently held with CGU to invest in his home. In addition he wanted a long-term investment which gave him greater personal control and didn't want to rely on the stock market.

During an annual review of his existing policies he discovered that both schemes were
underperforming. Darren is considering cutting his loses and utilising the lump sum currently held with CGU to invest in his home. In addition he wanted a long-term investment which gave him greater personal control and didn't want to rely on the stock market.

Solution - Syndicated Property SIPP

Poole-based IFA, Lewis & Co brought together Darren and 24 other investors, frustrated at seeing declining markets severely impact their retirement funds, to form a syndicate to purchase commercial property. 

Lewis & Co chose leading SIPP provider, Pointon York SIPP Solutions to do this innovative approach to using personal pensions.

The unique use of the Sipp combined with a syndicate opened the door for investors who cannot afford a whole property, whilst it takes advantage of the pension to shelter lease income and capital gains from tax.The investment property in Bournemouth selected (1-3 Westover Road ) was purchased for £2.4million. Syndicate members contributed a total of £1.1m, with a £1.45m mortgage utilised to cover the balance of the purchase price and cost of acquisition costs. The syndicate notionally divides into one thousand units valued at £1099 each. Upon repayment of the mortgage (assuming no increase or reduction in the property value) their value will be £2,400 each.

The property comprises offices and shops let on a 25-year lease agreement (the lease has 15.5 years to run) with an annual rental income of £150,000 to a publicly quoted company.  Upward-only rent reviews are guaranteed every five years. Rental income alone will clear the mortgage within 14 years (assuming interest rates don.t rise significantly).

Bournemouth is an up and coming town as well as being a popular thriving tourist area. Westover Road, on which the property is located (known to locals as the Bournemouth Bond Street), is a prime location overlooking the central gardens. Not only does this mean the prospect of income from leases is good, but there is excellent potential for a capital gain when it is sold at some point in the future.