Group investing is when a group of people join together to buy an investment—in this case, a property. This isn’t new: friends and family have been pooling their resources to buy property for hundreds of years. There are a number of different types of group investing and some of these, like property syndicates, indirect property trusts and wholesale investment trusts, have specific definitions. (You’ll find these on the ASIC web site.) Box Commercial assemble individual investors to share these kinds of investments. We call our service ‘investor grouping’.
The old saying: ‘The rich get richer and the poor get poorer’ is especially relevant today, in our climate of growing inequality. One of the reasons why the rich get richer is that they can afford to buy better quality investments. Really great property investments, with terrific locations, tenants, and potential, are expensive. I don’t know many people who can write a cheque for, say, a $20 million dollar hotel. But if that hotel was placed in a unit trust and made available for group investing, a share might sell for as little as $50,000. This means that really great investments are available to more people.
Usually yes, though you’ll need to obtain independent financial advice.
You could look at it that way. Companies like Uber, Airbnb and Flexicar are tapping into a booming global movement of people who participate together to share a resource. Investments are part of that way of thinking: if we pool our resources, together we can buy better, more secure assets with stronger returns.
Absolutely. Box Commercial only groups investors for investments run by ASIC-licensed managers, who compensate us on commission.
At Box Commercial, we do things a little differently. We don’t have flash offices or fancy cars. We’re only interested in helping our vendors find the best possible buyer, because that’s how we find the best possible price.
One of the ways we find the best possible buyer is through our unparalleled network of contacts from Rob’s twenty-plus-years’ experience in commercial property Australia-wide. These contacts include rare access to many property fund managers and syndicators, who’ve become major purchasers of investments over the last decade.
Commercial properties are owned by companies, syndicates, families and individuals— and each owner has their own reason for selling. All these owners, though, have one thing in common.
When you’re deciding on the best kind of campaign to sell your commercial property, be wary of cookie-cutter approaches, or agencies that try to make you conform with their standard, one-size-fits all approach.
Every commercial building has its own story and a good agent will spend time figuring out what that story is. What is the highest and best use of the building? What are its strengths and weaknesses? What is going on in the surrounding area? What kinds of businesses or investors are looking for a building like this one? What kind of buyer would place the highest value on the building: a business, an investor, or perhaps a syndicate?
The three main kinds of sales campaigns are auctions, off-market and expression-of-interest.
An auction is a terrific choice when absolute transparency is required. Some examples of this are: deceased estates with multiple beneficiaries; marriage or partnership breakdowns; and receivers or bank sales. Auctions work best with the property is reasonably uncomplicated—a simple freehold title, for example, with no business attached. When we recommend an auction campaign, it’s because we think that the property will attract lots of interest, is reasonably generic and has strong street exposure (a high-street shop, for example) with little due diligence required. Auctions are terrific for creating heat under the campaign, for bringing all the buyers together to force the best price, and for a fast result if the vendor’s in a hurry.
One downside of an auction campaign is the strict adherence to the vendor’s terms of sale. Not only can this dissuade some buyers, it removes terms of sale as a negotiating tool. (We’ve often negotiated a better price for a vendor by leveraging flexible terms.) Anything complicated, anything that includes a business, anything that requires due diligence or lots of legal advice is usually not suited to an auction campaign. Another problem is that interstate buyers are practically excluded. (I often sell properties in Queensland or New South Wales to Victorian buyers.) Auction campaigns are also expensive. Because it’s a broad, non-targeted approach, there’s a lot of advertising required, as well as the cost of the auction itself.
Sometimes investors, especially but not exclusively companies, don’t want their competitors or the market in general to know what they’re up to. That’s fine. There’s a number of ways this kind of campaign can play out, but a few of the tools that might be considered are valuation reports (so the vendor can be confident of receiving a good price without market feedback) and non-identifying advertising. Generally, though, we put our heads together with the vendor and come up with a likely shortlist of buyers. (We have decades of experience in commercial property and literally thousands of contacts in development, retail, syndication and investment.)
Then it’s a matter of controlling the information flow very carefully while we find the right buyer and negotiate the right price. Non-disclosure agreements can play an important role here, but they’re not the ultimate tool. We believe strongly in win-win relationships and when everyone is respectful and wants a deal to go ahead, there’s plenty of up-side for all parties.
Here’s a tip for running an off-market campaign: don’t forget your neighbours. Your agent should be happy to approach other businesses and property owners in your area (without disclosing your details of course). Expansion plans and acquisition strategies can change every day and sometimes, despite nation-wide interest, the successful purchaser is right next door.
Expression-of-Interest (EOI) campaign
In an EOI campaign, prospective purchasers have a set period of time to do their due diligence before submitting an offer by the due date. Until then, the offers are sealed so nobody knows what other purchasers are offering. Most often, we find an EOI campaign is the best choice to sell most investment properties.
In the early stages of working with a vendor on an EOI campaign, we put together a proposal that details the professional financial documents that we need, the marketing materials and an advertising strategy. I work with extensive databases accumulated during my more-than-twenty years of experience and personal connections I’ve developed over a lifetime. Analysis is critical in EOI campaigns. Any surprises can derail everything: zoning, permits, planning changes, leases, level of demand, and any risks need to be thoroughly investigated, managed and ultimately presented in the most succinct way in these times of information overload. Also, your agent must be able to handle a lot of enquiries efficiently and coolly. (We’re run EOI campaigns where we’ve managed over 90 enquiries from prospective buyers, leading to dozens of individual inspections.) The field of buyers starts very broad, then narrows. It can be high-pressure, but it’s often the best way to deliver the best price.
Absolutely! Owners sometimes want to release their equity from their property while retaining some level of ownership. The reasons for this vary: sometimes they’re running a business out of the property and want to lease it back while retaining control; or perhaps they have a strong commitment to the area, town or industry.
If a company is looking for a property, then they know exactly what kind of property they need to buy, lease or develop in order to meet their strategic plans. At Box Commercial, we’re often asked to find the perfect property and negotiate the sale, lease or development deal with the owners—whether the property is currently on the market or not. Our specific expertise in this area is in finding properties on main roads and highways, suitable for medical centres, quick service restaurants, self-storage facilities, servos or showrooms.
There are a number of advantages in an off-market sale or lease for the property owner.
- Because the buyer or tenant is approaching the owner, expensive marketing campaigns and advertising isn’t required. This can save the property owner thousands of dollars, and lots of grief.
- An off-market sale or lease is usually faster than hunting out the perfect buyer or tenant (see below).
- An off-market deal has no advertising or board, and fewer inspections so it’s easier to keep confidential—owners or existing tenants sometimes don’t want competitors or neighbours to know the property is up for sale or lease.
- An off-market deal can enable more flexibility in the transaction than a normal sale. For example, an owner may decide to co-invest for future profits by putting in the land as contribution to the overall development, and retaining a share of the ownership. We can introduce the right parties to perhaps fund and then construct the property.
- And finally, the highest-and-best use for some sites can be complicated deals with multiple owners, tenants and developers. When a retailer takes the initiative to begin negotiations, it can make it easier for other stakeholders to fall into place.
It’s important to remember that, unlike in residential real estate, a commercial off-market sale is not a fire sale. Rather, it’s simply a transaction initiated by the buyer instead of by the seller. Commercial property transactions always take a long time—negotiating, due diligence, finance and settlement are not quick when they’re done right.
Off-market sales do, however, save time by eliminating the sales campaign and the associated process of finding the right buyer or tenant. If you’re looking to sell or lease your building quickly, an off-market will save a substantial chunk of time—but it won’t happen overnight.
Generally, retailers are looking for good exposure to main roads or highways, and a substantial piece of land. For more information, look at our ‘acquisitions’ pages, or call or email us at Box Commercial.