Part of the Fund's strategy is to create third party investment opportunities by offering commercial property syndication's to accredited investors. In return for investment opportunities US Residential Fund will receive revenue. A guide to the level of revenue that may be generated is illustrated below. 

Real Estate Syndication and Associated Revenue

Unlisted real estate syndication is an effective way for investors to pool their financial resources to invest in properties and projects much bigger than they could afford or manage on their own. 
In the United States unlisted property syndicates are increasingly being offered through crowdfunding platforms

US Residential Fund has announced to the Australian Stock Exchange its intention to launch a property syndication business that will provide accredited investors with the opportunity to invest alongside the ASX listed US Residential Fund (USR).

Real estate syndication is simply the pooling of funds from numerous investors and channelling of those funds into real estate projects. These funds can be used to acquire a property in its entirety, or as an equity contribution to the project in addition to a commercial mortgage (which would generally fund the majority of the project’s costs).

While real estate syndication opportunities have been around for decades, until recently syndicated US real estate investments were difficult for individual investors to access, particularly for foreign investors living outside of the US. 

This is changing with real estate crowdfunding providing investors with access to financial fundamentals and deal metrics of individual property investment opportunities and then making it easy for accredited investors to purchase an interest in a specific property.

The syndication approach utilised by US Residential Fund incorporates crowdfunding techniques and will allow foreign investors to participate in US residential property investments alongside the ASX listed fund.

As a result of acquiring, financing and arranging the syndication of unlisted property investment opportunities US Residential Fund will earn income through both fees and investment returns. 

While each project will differ, following is an outline of the income that US Residential Fund, as Sponsor, has the potential to earn as a result of making investment opportunities available to third party investors. 
  1. Acquisition Fees – As a syndicator of real estate US Residential Fund will typically receive compensation for finding the property, conducting due diligence, and structuring the deal. Acquisition fees can range anywhere from 1% – 5% of the acquisition costs and are expected to average around 2%.
  2. Asset Management Fees – Where US Residential Fund acts as the asset manager it will receive an asset management fee. This fee is generally based on gross revenue and could range between 1% and 4% depending on the transaction requirements.
  3. Syndicate Management Fees – US Residential Fund will act as investment manager of the property syndicate and be responsible for the day to day operation of the syndicate, client and statutory reporting. For this role a management fee of between 2.0% and 4% of gross income would be payable (on average 2.75%).
  4. Equity Participation (Cash Flow & Appreciation) – US Residential Fund will be compensated for its equity participation in the property syndicate. US Residential Fund’s stake in the project could range anywhere from 2% – 50%. Along with accredited investors, it is expected to receive on average a preferred rate of return of 8% on their invested capital. After each investor receives a preferred return, the remaining money is distributed between US Residential Fund and the investors based on the syndication’s profit split structure. Typically US Residential Fund could expect to receive between 20% and 30% of the returns above the agreed investor preferred return. 
  5. Disposition Fees – Generally paid for completing the work necessary to sell a property, the disposition fee is usually calculated as a percentage of the sale price, and the percentage typically declines as the sale price increases. This fee is taken out of sale proceeds prior to any distributions to investors and is expected to range between 0.5% and 1%.