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Case Study: 40% gross return in 5 months: How our latest investment delivered

November 13, 2019
Categories: Case Study, Commercial, Industrial, Investments

Our latest investment, Pathway Fourteen Unit Trust, had an interesting caveat to it: The tenant of our Larapinta property had only nine months remaining on their lease. Instead of shying away from such a short tenure, we were jumping up and down about it.

“We can get in here and reposition that tenancy profile, and extend that lease, and look that risk right in the eye – understand it acutely – and as a result of that, add enormous value.”

Our Managing Director Cal Doggett’s words are etched in stone here at Properties & Pathways. We knew this investment had major potential uplift if we could negotiate a large extension with our existing tenant, the globally renowned yellow goods provider CAT® Energy Power Systems.

Watch Cal discuss it below:

And that’s exactly what we’ve done – repositioned the tenancy profile for significant tenure which drastically improves the property’s future rental platform.

How’d we do it?

CAT was paying rent approx. 10 per cent to 15 per cent above current market levels. This provided us a distinct negotiating advantage as a new landlord.

The short remaining lease term also allowed us to acquire the asset on a relatively high initial yield, allowing for significant capital uplift by renewing the lease term.

While we planned for a seven to eight-year tenure, we were able to over-deliver by negotiating a 10-year extension to CAT’s lease.

What was the result?

Well, we purchased the asset at 50 Arc Place, Larapinta QLD for $7.86 million. And five months later, we estimate its value at approx. $10 million.

This is a fantastic result early in the investment’s lifetime, and we are very proud of it.

But the story does not end there.

The lease we signed with CAT included a mechanism to construct additional hardstand for them, and charge additional rental once finished. And that’s what we’re close to commencing now.

This will increase the rental return even further and will likely catapult the value to circa $10.5 million.

We still have plenty of value-add strategies to implement for this syndicate, but this was a great way to kick things off. And importantly, it was a welcomed and very fitting reward for our loyal investors who supported and believed in our vision.

For more information on our upcoming investments, get in touch with Properties & Pathways today.