Each property is chosen for its potential to provide reliable income, rising as rental income rises, and a capital gain for investors at least equal to inflation, over the life of the syndicate. The target distribution is a margin over the bank fixed deposit rate commensurate with the risk of the asset.
As commercial property income is rent from tenants, the property’s location, design and operation must promote successful tenant businesses and continuity of occupation – no vacancies is the objective – across the economic cycle. This can only be assured after thorough due diligence.
Properties are preferred in established areas where competition can be assessed with some certainty and the property has good access to infrastructure and support services.
A multiple tenant property is generally preferred to a single tenant property, unless the single tenant is of high quality, there is good reason to believe the single tenant will continue in occupation and the property is in a good position to be leased to a replacement tenant or multiple tenants if the single tenant moves on. A preferred tenant is one whose business and position is financially secure but better quality tenants can mean lower rental yields.
A long lease is an advantage but a shorter lease allows rent to be reset to market regularly. In retail property, shorter leases enable the offer or “mix” of the shopping centre to be adjusted regularly. An attractive combination is a fully occupied property with a quality “anchor” tenant on a longer lease and other tenants on shorter leases.
Fawkner Property has identified a market segment in the $12 – $50 million range, where reduced competition from institutional buyers and individuals allows yields to reach 7.5-10%.
Management for Tenant Success
Fawkner manages property to facilitate the success of the tenants’ businesses. Successful tenants renew their leases. Successful tenants draw other successful tenants. In short, successful tenants make a successful property investment. Removing barriers to the growth and profitability of the businesses being conducted by tenants is an important strand in the Fawkner Property style.
Fees and costs
Fawkner Property keeps fees down to maximize returns to investors. Without sacrificing transparency, we avoid unnecessary costs, such as audited general purpose financial statements, independent valuations and glossy brochures. Fawkner Property manages each syndicate as a prudent and frugal trustee of other people’s money.