How a syndicate ends: the decision to sell and what happens next

What prompts a sale

Four things usually start the conversation.

A lease expiry approaching. The building's value shifts as a term shortens, and participants have to choose between selling with income in place and holding into a void with the reletting risk that carries.

A reversion crystallised. Where the business plan was to capture a reversionary rent, and the review or the new letting has delivered it, the value created is in the price. Holding beyond that point is a fresh decision on a fresh asset rather than a continuation of the original one.

An offer. Approaches arrive off market, and a price that reflects an investor's own requirement rather than the open market is worth putting to the register even where no one was planning to sell.

Capital expenditure the participants do not want to fund. There is no bank debt in a syndicate, so a roof, a shopfront or a reconfiguration is met by the participants or out of retained income. Where a material spend is needed and the register has no appetite for it, selling is the honest answer rather than deferring the work.

The vote

The decision to sell requires a 75% majority of participants, the same threshold as every other major decision. A participant who wants to sell cannot force it. A participant who wants to hold cannot stop it once the threshold is met.

We put the case with the annual independent valuation, the current passing rent, the lease position and our view on the likely exit yield. Participants are voting on a recommendation they can check against a valuation they did not commission.

Marketing and agency

Once the threshold is reached, agents are instructed and a marketing strategy is agreed. Whether the building goes to the open market or to a targeted list of buyers depends on the asset, and both are used.

The sale then follows the ordinary commercial path. Heads of terms, due diligence on title, leases and dilapidations, and an exchange. A buyer who goes unconditional early is worth a discount, and a buyer with a long conditional period usually is not. Participants should expect the process to take months rather than weeks, and to be capable of failing at any point before exchange.

Completion, costs and the final distribution

At completion the building is transferred and the proceeds are received into the syndicate. The quarterly income stops at that point, apportioned to the date of completion.

Costs are deducted before anything is distributed. Agency and marketing, legal fees on the sale, any outstanding management costs, and the balance of any dilapidations or service charge position. On some syndicates Helmsley takes a share of any uplift in value on sale. Whether that applies, and on what basis, is set out in the offer document for that syndicate rather than determined at the point of sale.

What is left is distributed to participants in proportion to their holdings. A participant receives their share of the net proceeds, which may be more or less than they invested. The syndication price and the latest valuation are both visible on the portal, so the direction of travel should not be a surprise by the time a sale completes, though the final figure will differ from the valuation.

What happens to the vehicle

Once the proceeds have been distributed the syndicate has no asset and no purpose. The vehicle is wound down and the record is marked retired. Participants receive the closing statements for their own records and for their adviser, and the holding drops off the portal.

Tax on a disposal depends entirely on the holder's circumstances and on how the holding was held, including where it sits in a SIPP or SSAS. We do not advise on it. Take the closing statement to your own adviser and pension provider before you commit the proceeds elsewhere.