Case study: Turning uncertainty into opportunity through due diligence

Case study: 16 Thomas Road, Kwinana Beach

When evaluating an investment property, ensuring a thorough due diligence process is essential to mitigating risks and unlocking hidden value. Our experience with 16 Thomas Road, Kwinana Beach, is a prime example of how disciplined investigation can transform a potential liability into a high-quality asset acquired at a significant discount.

Initial concerns: Market perception of contamination

At first glance, the property at 16 Thomas Road was priced considerably below market expectations. The primary reason? It had been classified as ‘Possibly Contaminated – Investigation Required’ by the Western Australian Department of Water and Environmental Regulation (DWER). This classification created uncertainty, deterring potential buyers and lowering its perceived value.

Despite this classification, we saw an opportunity. Rather than dismissing the asset outright, we committed to a rigorous due diligence process to assess the actual environmental risk associated with the site.

Thorough investigation

We engaged market-leading environmental research firm Golder Associates (Golder) to conduct two major studies:

• Environmental Report (dated December 2021)
• Groundwater Investigation Report (dated April 2022)

Additionally, we reviewed multiple historical reports, including environmental assessments dating back to 2004 and an emissions assessment from 2017. A review of the Contaminated Sites Database confirmed that while the site had a ‘Possibly Contaminated’ classification, no official designation of contamination had been assigned.

To strengthen our findings, we commissioned independent groundwater sampling and environmental investigations. The key steps included:

1. Inspection and development of five existing groundwater wells
2. Drilling and installation of two additional groundwater wells
3. Collection and laboratory testing of samples from all seven wells

The results were definitive—there were no exceedances of screening criteria for soil or groundwater contamination. This corroborated prior reports and provided strong evidence that the site posed minimal environmental risk.

Reclassification and Value Enhancement

Our findings, supported by independent legal and environmental reviews, positioned us to take action. We applied for a reclassification of the site from ‘Possibly Contaminated’ to ‘Remediated for Restricted Use’—the highest classification available given its historical use. Supporting factors included:

• Strong historical data confirming low contamination risk
• The tenant’s adherence to strict environmental and safety protocols
• The fact that all neighboring properties had already received the ‘Remediated for Restricted Use’ classification

Just three months after acquiring the property, we successfully secured the reclassification, eliminating the uncertainty that had previously depressed its value.

The Outcome: A Strategic, High-Value Investment

By leveraging our due diligence process, we transformed an overlooked asset into a secure investment with significant long-term potential. The results were clear:

• Acquisition at a 14 per cent discount to market value due to perceived contamination risk
• A decade of stable lease income with a tenant operating in full environmental compliance
• A prime industrial location spanning 19,500 sqm with 3,000 sqm of excess developable land
• Long-term protection through lease provisions, ensuring that any future contamination would be the responsibility of the tenant, not the landlord

In the end

Our experience with 16 Thomas Road highlights the importance of rigorous due diligence. Rather than allowing market perception to dictate our decisions, we conducted a thorough investigation, uncovered the true environmental status of the site, and secured a high-value asset at a significant discount. This approach not only safeguarded our investment but also delivered substantial upside potential for our investors.

By turning uncertainty into opportunity, we exemplified the value of informed decision-making—demonstrating that, with the right strategy, perceived risks can often become an investor’s greatest advantage