Private Property Trust No. 4

All our roadside retail properties must meet our strict criteria to ensure they will provide the best value for our investors. We also use a comprehensive due diligence process which includes:

The convenience, Quick Service Restaurant (QSR), and fuel retail sector provides highly desirable commercial property investments. The sector is resistant to economic downturns and strong tenants provide reliable monthly income.

At Fawkner property, we are market leaders in roadside retail and convenience, and we have syndicated over $250 million in roadside retail assets.

All the properties we purchase for our trusts must meet our strict selection criteria. We also have a comprehensive due diligence process to ensure our investors get the best outcome. Our due diligence checklist includes:

• Ensuring that the property has no latent defects
• Comparing the property to its market peers
• Ensuring that the conveyance is legally effective
• Form a capital expenditure plan to assure funding for standard maintenance

Retailers such as supermarkets enjoy a unique position in the market since they form part of consumers' essential spending. Large supermarkets also have long leases with fixed rental increases.

Our trusts are designed to provide reliable monthly income and long-term capital stability, which makes non-discretionary retail an ideal choice.

We have a comprehensive investment process which ensure any property we purchase as part of a trust meets our strict criteria. Our due diligence checklist includes:

• Ensuring that the property has no latent defects
• Comparing the property to its market peers
• Ensuring that the conveyance is legally effective
• Form a capital expenditure plan to assure funding for standard maintenance

Childcare and early learning centres may not be the first thing you think of when it comes to commercial property investments, but they provide a highly desirable opportunity. Some of the reasons why we invest in childcare include:

• Childcare is an essential service so it is resistant to economic downturns
• Demand will continue to rise as the population grows
• Large, financially strong national brands ensure reliable rental income

One of the risks of commercial property investment is tenant risk.  This includes the risk that:

• The business of the tenant fails and the tenant is unable to continue to honour the lease obligations
• The tenant completes the current term of the lease but does not renew
• And there is a market review and, based on the business of the tenant, the rent reduces

These risks and the way in which Fawkner Property deals with these risks is set out in a separate section of the disclosure document devoted to risks of investing.

There is limited information for the commercial property investor.  Despite vendor statements, with more or less disclosure depending on the jurisdiction, and registered leases (other than in Victoria), there are many side deals between landlord and tenant and, except in major shopping centres, the trading position of a commercial tenant is difficult to find out.

Tenant demand for commercial property is what economists call a “derived demand” – meaning that the commercial real estate is used in the production of goods or services for sale by the tenant.  Understanding the drivers of the business of the tenant gives insights into the prospects of the tenant and the reliability of the rental stream.  It is not much use having fixed annual increases in rent if the higher rent becomes beyond the capacity of the tenant to pay.

Becoming knowledgeable in the business of particular types of tenants is exploiting the lack of information that pervades commercial property markets.

While Fawkner Property people have long experience in commercial and industrial property broadly, we have developed market leading expertise in motor vehicle fuel and convenience retail, as well as early learning.

SMSF trustees invest in property syndicates to obtain reliable regular income payments, while protecting their capital from inflation.  Property syndicates provide regular income from monthly rent payment from tenants in commercial properties.  With annual rent increases, the value of the properties rises over time, keeping pace with inflation.

If Investors do not vote to wind up the Trust at the Exit Offer, the trust will be extended for a time recommended in the report accompanying the Exit Offer. Essential Services Trust 1 will have a provision for annual minor liquidity events, if the trust continues after the Exit offer. These Limited Redemption offers will be for a specified number of units at Fair Value, up to 5% of the trust. Any redemption offer will be sent to all Investors and be subject to the trustee being satisfied that the offer is in the interest of all Investors.

All trusts have a fixed term – usually six or seven years – which is set out in the disclosure document. At the end of the term an Exit Offer is made to investors, giving them the chance to exit at a nominated exit price, determined by the trustee in accordance with the deed (Fair Value). If 75% or more elect to exit, the trust is wound up. If less than 75% wish to exit, buyers are found for their units at the Fair Value. Priority is given to existing unitholders to purchase the units at the sale price. If units remain unsold after six months, the trust is wound up.

There are some important contrasts:

• The syndicate is professionally managed, so you do not need to be involved in hiring managing agents, leasing decisions, capital expenditure decisions, and owners’ corporation meetings.
• Capital expenditure is allowed for by the manager, so you will not need to come forward with more money to upgrade the property.
• If there is a loss, your downside is limited to your investment, whereas in a geared residential investment, the lender has full recourse to your other assets.
• Commercial properties are not subject to residential tenancies legislation, which limits the field of action of the landlord.
• While residential property leases are for a maximum of one year, with a market rent review each year, commercial property leases are longer – sometimes longer than 10 years – and have fixed or CPI increases each year, giving greater certainty of income.
• Dealings with commercial tenants are based on business principles, whereas dealings in relation to the principal place of residence of a tenant can have an emotional overlay.

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As a commercial property syndicator, Fawkner Property creates unit trusts, which purchase commercial properties, and offers the units to investors.

The goal of these trusts is to provide investors with reliable monthly income derived from commercial properties tenants as well as capital growth in the value of the properties.

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