Office-Space-Commercial-Property

Why we invest in Commercial Property

Many people ask me why we invest in commercial property. There are several reasons why we invest in commercial property. The most
notable are:

We are experts in managing commercial property;

We have over 30 years experience investing in commercial property;

The yield on commercial property is in general higher than most other property investment classes;

Investing in commercial property enables us to diversify into both office and retail property;

Investing in commercial property enables us to also geographically disperse our investment interest;

We are in favour of direct investment in commercial property because it gives us greater control over our own destiny. Ultimately, our success
or failure in our investment in commercial property depends entirely on our own efforts.

For most investors the only practical way of investing in commercial property is to buy units in a listed or unlisted property trust. Historically
the property trusts have performed well e.g.: Westfield has been a very notable former when it comes to investing in commercial property, in
their case shopping centres.

The difficulty we find investing in shares is it requires a lot of trust in the company or entity that you're investing in. What are the management
really doing? How good are they? Are they treating the company as if it their own? While we think it is important in any investment strategy to
have some exposure to the share market equally if your personal wealth allows it we think it is sensible to have exposure to commercial
property whether it be direct or indirect.

What we like about investing in commercial property is that it enables us to earn a reasonable income in the short term and in the longer term
we like to add value to our commercial properties. Whether it be adding additional floor space to the commercial property, upgrading the
commercial property's facade, splitting the office and retail spaces within the commercial property and even sometimes amalgamating the
office and retail spaces within the commercial property, there are a number of ways to add value to a commercial property.

Some of the pitfalls in owning a commercial property are:

The real cost of running a commercial property is higher than the outgoings figure you will see when an Agent discloses the income and
expenditure for the particular commercial property you are interested in.

To upgrade your commercial property is very capital intensive and often requires payment of development levies up front before you can
redevelop your commercial property which is very expensive and requires a lot of money.

How much debt do you have against your commercial property? In good times, the more debt you have in your commercial property the
better the returns for your equity. However, in bad times the more debt you have in your commercial property the greater the risk the bank
will foreclose on your asset, most likely wiping out your equity.

Owning direct commercial property is not for the novice investor, which is why investing in property trusts that own and manage commercial
property is often the right way to go.