Syndication

Let’s Get Together

Seeking a vacation home in the Caribbean brings to mind amazing value propositions in lesser developed destinations, but the reality of waterfront pricing can be sobering. In the 80’s and 90’s, there were opportunities in a number of destinations to purchase waterfront inexpensively, but those days are gone.

Caribbean properties are in high demand as one of the world’s most sought-after second home destinations. Every month, we receive loads of calls from buyers seeking homes for less than 300k, beachfront preferred. If we had this inventory, it would sell out in a day!

One solution to the high prices has been for property seekers to team up with others for their purchase. When a group of purchasers comes together to hold one property, we call it a Syndicate.

The group forms a holding corporation and shares the home according to their own agreed usage patterns. This enables buyers to purchase the homes they want at the cost they can afford. Often, vacation homeowners don’t need year-round access, so a shared ownership model can meet their usage needs.

Syndication v. Fractional ownership

Syndication is not the same as “fractional ownership”. Fractional ownership is offered by developers to address the same issue of high entry prices. It can be a wise solution for purchasers as well, but the value proposition isn’t as strong. Often the fractional ownerships offered by developers have significant premiums built-in.

For example, a million-dollar home is divided into one sixth fractional ownership, which gives each owner two months usage per year, but they sell the one sixth share for 250k, thereby driving the overall price 1.5M, a fifty percent increase!

However, when six purchasers form their own syndicate and purchase the home at 1M, each owner’s share only costs 167k. Keen always encourages solutions that drive value for the purchaser.

Syndication isn’t anything new. For generations, families have come together to purchase beach houses to share. Over the years, we’ve helped a number of groups purchase their own homes in this way.

We’ve had business partners and groups of doctors, or lawyers, decide to buy together in order to get the home they want for the amount that they are comfortable investing.

Keen aids groups with their due diligence and group dynamics. It’s important that the group’s usage be clearly defined in their holding company’s by-laws. Often, partners want a right of first refusal if a partner ever needs to sell their shares. We work with the group’s attorney and all members to assure the value of the purchase is matched by the clarity of the agreements.