Syndication of up to 10 members per stand is allowed on a limited number of the Private Stands in Mountainlands Nature Reserve. Any of the remaining private stands may be syndicated.
What is syndication or Fractional ownership?
Syndication (also called Fractional ownership) is when a number of buyers (up to ten in the case of Mountainlands) purchase one of the private stands together. This is normally done by registering a company with a pro-rata shareholding to each of the syndicate owners. The company then owns the full title to the stand upon which a private lodge for the benefit and use of the syndicate members is built. Syndicate members share the use of the lodge and common facilities on a rotational basis. This arrangement is captured in a syndication agreement which regulates the relationship between the members and stipulates a fair mechanism for rotating the use between them.
Some of the important benefits of syndication are:
- Optimal usage of the investment i.e. cost of land and improvements divided between the members.
- Maintenance and running cost are divided between members.
- Security of investment through full title ownership of the stand which is a growing asset.
- Syndication shares are traded on the open market thus bringing liquidity to the investment.
- Lower transaction costs upon sale of the shares.
Download a draft Syndication agreement here. While it is up to the syndicate members to decide how they wish to structure their syndicate, this is an example showing a typical approach.
Private Syndication, as in the case of Mountainlands, is distinctly different from public syndication such as in commercial ventures. In the case of Mountainlands there are no initiation or placement fees and syndication members often know each other personally. The syndicate members setup the syndication themselves for their collective benefit, without the involvement of third parties. In essence they use a private company simply as a vehicle for holding their collective asset (the property and lodge). In this way there are no complicated layers of shareholding (which has been the challenge on some public syndications), and the main assets are thus directly owned.
Difference between Syndication and Timeshare
- With timeshare you never own the property or become a shareholder as you only buy an allocated time slot and not an actual asset.
- In a private syndicate, you are an active player in the property market through ownership of the property and its shares.
- Timeshare decreases in value while syndication ownership increases in value in line with property growth and capital gain.
- Private syndicate shares can readily be resold, whereas with timeshare you are normally tied up for a contractual period.
- Timeshare is often oversold, which means you struggle to get available space as facilities are over booked long in advance. This is not possible with syndication as the weeks of usage are fixed nor can there be more than the number of ownership shares. With private syndication, usage weeks are often swapped out between owners who, if not initially, eventually get to know each other.