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[Case Study] A Perfect Introduction to Commercial Property Investing

21 January, 2019
Categories: Case Study, Commercial, Investments

“Its value rocketed. Its income rocketed.”

Properties & Pathways began its portfolio in 2012 after being approached by a group of first-time investors. Several years on and the portfolio’s first investment OzDog Properties Unit Trust is still building wealth for investors.

Opportunity

Alan Doggett, co-founder of Properties & Pathways, has had global success in commercial real estate. This was well known by a group of Perth investors, who approached Properties & Pathways in 2012.

“None of them had been in property before,” says Alan, “but that’s what we do; provide expertise in an area where they have none.”

The investors wanted:

  • Significant capital growth

  • A reliable and convenient investment, with complete transparency

  • Regular income distributions

Their issue: no capacity to achieve this on their own.


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Solution

Properties & Pathways understood the investor requirements, and found the perfect solution in a brilliant retail site on 1500 Albany Hwy, Cannington WA:

• Large 1400sqm net lettable area
• Superb location, highly visible on corner of main artery
• Three individual lettable sections
• Great tenancy (Gascoyne Furniture)

The strength of Gascoyne Furniture as a sole occupant was discovered by an interpersonal approach from Alan.

“I went and spent three hours with him. Got to know him. Saw what type of tenant he was – a successful businessman with a group of existing properties. I got to know him quite well and it gave every indication that he’d be there ongoing.”

With Gascoyne Furniture on a new five-year lease, the property was purchased for $2.8 million. Properties & Pathways invested alongside its investors with a 25% share in the asset.

After its term was completed, Gascoyne was forced to depart the premises as its parent company pushed to downsize all stores to 700 sqm sites.

The departure threatened to leave Properties & Pathways with its first vacant property. This had the potential to halt the rental income, the property value and the investors’ confidence.

Outcome

Properties & Pathways discussed with the investors the need to find a replacement tenant. Explaining to the syndicate that a secure tenancy is integral to the performance of the property, we wanted the next occupant to be a blue-chip tenant.

One was found within a month. Negotiations were immediately underway with Suncorp Bank.

As the property was split in three sections (two in the front, facing the road; and one behind), the bank’s original desire was to lease the two road-facing sections.

This would leave one-third of the building unoccupied.

“I knew our rent in the back area would drop big time, and we’d struggle to lease it… The property wouldn’t be special anymore – the third section needed to be a part of the building on the road.”

Properties & Pathways negotiated a deal to ensure Suncorp took the entire building. The bank’s enthusiasm was obvious.

“We took them on a 10-year lease, and we went from a good tenant to a blue-chip tenant. They wanted it badly… they even put $2 million worth of fit outs in the property.

“Its value rocketed. Its income rocketed. So much so that we were able to borrow money from the bank from the increased value in the property, and put that into a new property.”

Performance

Capital Growth

1500 Albany Hwy was revalued in 2016 at $4,190,000 – a 49.64% increase in value in four years.

This means the approx. return on capital investment for our investors, with around $1 million invested, was an incredible 141%.

Yield

After losing a great tenant in Gascoyne Furniture, a much greater one was found in Suncorp Bank. The investment is still going strong.

Reliable investment

The additional finance from the success of 1500 Albany Hwy was used to purchase Tuggerah Supa Centre in 2016 (achieving 58% profit in 12 months and a 40% return in 18 months). The proceeds from this investment was then put into Pathway Nine Unit Trust – a $16.5 million investment providing 8.73% p.a. yield in year one.

“So, from the one investment, we’ve ended up in four properties. And that’s how you make money in property… growth on growth on growth.”

As for the first group of investors in Properties & Pathways…

“At least four have been in seven of our syndicates”, says Alan. “You can’t beat commercial real estate…

“When you’re on holiday. It’s growing.
When you’re out at dinner. It’s growing.
When you’re sleeping. It’s growing.”

To have a robust commercial property investment working for you while you eat, sleep and enjoy life, get in touch with Properties & Pathways today.

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