"The commercial property investment market now has the same disclosure rules as any other public offering. It cannot rely on the exemption notice," Ratuki says.
"The Orion offering shows willingness by one of the major operators in the industry to embrace the new regime and demonstrates that the commercial property syndication market can continue to operate without the exemption notice.
"The Orion offering gives the investment public confidence as there is a registered prospectus that has been subject to FMA consideration in the same way as any other offering, a deed of participation which is a registered public document and a statutory supervisor to oversee the offering. These things give investors greater protection and comfort."
Ratuki says that the rules - as exemplified through the Oyster Group's Orion Building offering - now mean that participants/syndicators are subject to a greater level of disclosure and compliance.
"The FMA have been extremely helpful in this process. We engaged with them early on in the project. Initially they provided feedback, advice and direction on specific issues we had in relation to constructing a commercial property investment product within the prospectus regime. This was helpful to our initial drafting.
"Investors now have greater protection as, over and above the appointment of the statutory supervisor, there are incidental changes to the structure we have traditionally employed.
"One such change is that the statutory supervisor controls the appointment of directors to the company that has legal ownership of the property on behalf of investors. This means that the scheme manager does not control the property owning entity, which has been a problem in relation to some schemes set up under the exemption notice. This is another factor that should also give investors confidence."
Tompkins Wake says the full disclosure regime doubles the amount of time needed to bring a commercial property syndication to market, and increases the legal fees involved by about a third.
Required documentation now includes the prospectus, a deed of participation setting out how the scheme will operate, and an investors' statement summarising the offer.
"The process involved under the exemption notice saw offerors, rather than independent third parties, take responsibility for compliance in a regime that was totally prescriptive," Ratuki said. "We used to be able to bring syndications to the market within two weeks, but now we'd recommend participants allow for at least a month."
Syndication
What: Oyster syndication of Orion House
Result: Fully subscribed over a week early
Feature: First syndication since expiry of Securities Act exemption
Implications: Should give investors more confidence in commercial property marketr
