First-timers will rarely get it right. No matter the field, this is as much true in sport, academics or music as it is in business.
More specifically, it also holds true in commercial property investment. The best deals and the most prosperous opportunities go to the experienced.
Imagine a first-time investor buying the same asset as an experienced commercial property syndicator. Would they receive the same terms and interest rate from their bank? Would they know where to source the best legal, accounting and structuring advice? Would they have market evidence and valuation expertise at their fingertips? Would they be in the front or back of the queue for unique investment opportunities?
There are many traits of an experienced commercial property syndicator which might go unseen to the untrained eye. But in reality, they don’t jump the hurdles of commercial property investment – they remove them.
Analytics & Adding Value
A mum and dad investor has access to many of the same important tools, reports, and publications as the professionals. For instance, RP Data is one of Australia’s top sources of property data, insights, and analytics, and can be purchased by anyone from $150 per month. Similarly, a commercial valuation can be ordered by anyone with an interest in a vendor’s property (usually at a negotiated price).
However, it takes experience and expertise to interpret the information from these data sources and even more experience to then take action.
A syndicator’s in-house Acquisitions Manager will have a comprehensive understanding of property valuations, lease agreements, and market trends. Such an expert will look beyond just the obvious data (i.e. valuation history, Weighted Average Lease Expiry, etc.) and base their judgement on the incredible number of external influences of a potential investment. For example, they may monitor a buoyant commodity market, which could push white collar workers back to work, as well as a demand for office space.
Information in the right hands can directly contribute to years of solid returns. Particularly for those willing to get their hands dirty in creating extra value.
Long & Deep Relationships
Previous Properties & Pathways blog posts have touched on how a syndicator will have direct access to a broad spread of industry specialists. Repeating this point is just to highlight that investor relationships are paramount when purchasing well.
Starting the investor journey, particularly in commercial real estate, comes with the huge task of establishing reliable connections with a wide-range of experts, including:
- Commercial Valuers
- Solicitors & Advisors
- Property Agents
After a first meeting with these professionals, a new or early investor will have their business card and their direct contact details, but not their attention.
A seasoned commercial property syndicator will be at the front of an agent’s mind when a property owner decides to sell. This creates a hugely advantageous buying situation, as the syndicator is potentially competing for property ownership between only one or two other investors (throughout the entire country).
Immediate contact with valuers, solicitors, and bankers ensures a quick flow of information. Particularly for a small, dynamic investing firm, which directly translates to the timeliness of solid decision-making. Success in the commercial real estate industry is often a case of coming to quick, well-considered conclusions, and acting first.
This is also true with relationships on the tenant side of the transaction. A commercial property syndicator, with a good track record, may not even need to advertise vacant premises. A direct line to the decision-maker of a large retailer may be the only phone call they need.
Big, Bold Investments
Quality returns are the result of quality investments.
The ability to buy big is one of the key benefits of investing with a syndicate. And this is where the quality comes into play. While a mum and dad investor might only have the means to purchase a small commercial property, deep access to large capital pockets allow syndicators to secure assets of considerable size which, by their very nature, are home to considerable business with scale, reputability and financial stability. For example, compare the local fish & chip shop to a Bunnings warehouse – which would you prefer as a tenant?
Ultimately, a syndicator has a larger pool of available funds, which often allows the acquisition of a much bigger, more relevant, better located and higher quality asset. It may be occupied by a national or international company on a lengthy term, have a tangible guarantee behind it and as a result, the risk of any potential investment is minimized.
A commercial property syndicator, investing alongside trusting investors, has a tangible interest in keeping their investments robust, secure and high yielding.
Speedy Ability & Willingness to Transact
Unfortunately, but not surprisingly, mum and dad investors often enter the market at the end of the curve.
When the market has shown a period of promise, the typical investor will instinctively raise their hand to invest. This is the natural, emotional, and reactional response.
A smart commercial property syndicator will transact only ahead of the curve. This is not the result of luck. It’s a combination of their contacts in the industry, their first preference as buyers, and their willingness to act.
Counter-cyclical acquisitions are often the ones which show the most promise. But these come with inherent hurdles, which need to be identified, understood and mitigated before investing. The syndicators willingness to act is a culmination of understanding these factors, which are a derivative of their networks, experience and access to information.
This ensures they ride the positive cycle for the longest potential time, from beginning to end. After all, the foresight to sell is equally as important as the ability to buy appropriately.
The end result of the above benefits is threefold: Reduced risk, maximised return, and removal of the hurdles some fear are all associated with commercial property investing.
If you’d like to learn more about investing alongside an experienced commercial property syndicator, get in touch with the team at Properties & Pathways. We don’t set the trends, but we like to ride the cycles.