What is a SAF?
A SAF is an arrangement whereby like-minded investors collectively allocate funds to invest in commercial property, a purchase they might typically have been unable to afford on their own.
Private investors have traditionally been unwilling or unable to invest directly in commercial property, either due to insufficient funds or, if funds were sufficient, due to the risk of putting all their money into a single property. Syndication allows groups of people to pool their resources and purchase property otherwise unavailable to them, thereby reducing risk and exposure.
How does a SAF Work?
A SAF falls under the UK Financial Conduct Authority’s (FCA) definition of an Alternative Investment Fund. As such, SAF managers, like SIRE Capital Partners, must be regulated and authorised by the FCA.
The FCA has strict rules around the promotion of investment products and the handling of client money. This is to protect investors from bad actors who allocate investor funds to purposes other than those intended.
A properly structured SAF should look something like the figure below. Hover over each of the boxes to learn more about the role of each element in the structure. The structure below would be considered “transparent” for tax purposes, and investors pay taxes (if any) based on their tax jurisdiction when they invest. If an investment is made via a SIPP or SSAS, it is often tax-free.
Figure 1: SAF Structure
What are the Benefits of a SAF?
Property investment in any form has the potential to be a lucrative and attractive investment, both for income and capital returns. However, investing via a syndicate can bring added advantages:
Figure 2 – Benefits of a Commercial Property SAF
What are the Risks and Mitigants?
The key risks of investing in SAFs are the same as those associated with direct ownership of commercial property. Some of these risks can be mitigated through careful asset selection and attentive asset management. However, this asset class does have specific risks that need careful consideration.
Figure 3 – Risks and Mitigation Strategies
Investing with SIRE Capital Partners
Working with a specialist healthcare investment manager ensures your objectives are well understood. In the current market, it is essential to work with specialists who can produce results based on the most up-to-date, informed, and educated views.
Small incremental changes to terms can lead to larger variations in expenses and outcomes. We manage our clients’ risk exposures across the entire investment process. This covers all aspects of transaction management, from deal origination, detailed underwriting, and post-due diligence checks to ongoing asset and property management.
Sam Faulkner, CFA is a Principal and Co-founder at SIRE Capital Partners, working on Deal Origination and Asset Management.
Prior to joining SIRE Capital Partners, Sam was a Portfolio Manager at CBRE Investment Management. Investing on behalf of several large defined benefit pension schemes, Sam has been investing in UK operational real estate since 2017.
At SIRE Capital Partners, Sam is focused on acquiring healthcare real estate that delivers attractive risk-adjusted returns for clients.
