Position of the Property is the Most Important
on Value

Preface: After 20 years of building his business Precision Group, Mr Shaun Bonett (one of Australia’s Top 200 Richest People) says that the most important aspect of business in the Australian Commercial Property Sector is that it is done with a focus on substance and relationships, instead of appearances. Here he shares his insights he has acquired in building his business in Australia.

The MacArthur Central Shopping Center, one of the largest shopping center's in Brisbane CBD area, owned by Precision Group, has probably been my most successful investment over my career so far. It is situated right in the middle of the Brisbane CBD where the office and retail precincts meet. Over the last 8 years I have redeveloped the shopping centre over 4 levels so that it now contains a large Woolworths supermarket, a Big W department store, a JB Hifi technology store, as well as the largest Apple store in Australia. In addition, the shopping centre has approximately 50 specialty stores that provide our customers with everything from service retailers for their convenience needs to luxury retailers like Omega and TAG.

The reason I brought this property up is to illustrate how important the geographic position is when buying a commercial property in Australia. It is the most important factor on the value of the property.

You can't do enough due diligence when looking at a property you think you may wish to purchase, but don’t make the mistake of over focusing on secondary considerations and allowing them to take a primary place in your overall judgment of whether you should proceed with a transaction. At the end of the day most property can be redeveloped, refurbished, even rebuilt, but you are unlikely to ever be able to materially improve a property’s position. It is this aspect that is one of the key drivers to continued asset growth in Precision’s portfolio, even during the global financial crisis my properties grew in value.

Other than the position of a property, a property’s lease covenants have a very important influence on the value of a property. How long the term of a lease(s) is, the financial strength of the tenant(s), and of course the amount of rental that they pay to the landlord and the level of their rent reviews that apply, will all be key factors that have an impact on the potential value of a property. In addition, the condition of a property and its access to public transport will also be factors that have an impact on its value.

When I pick a position to invest in, I always look at population growth forecasts and what disruptive events that may occur which may deteriorate or benefit the position. I also look at the neighboring properties surrounding a property I am looking at and consider how they may be redeveloped in the medium to long term.

A good position has a positive impact usually on all aspects of a project. A good position almost always means that the property will have greater visibility to passersby, which provides an opportunity for a developer to make a stronger statement with their project. This then usually translates to more interest in the leasing or sale of a project, which means higher rents that a developer is able to obtain, or a higher sale price. As I mentioned earlier, the reason that MacArthur Central Shopping Center is one of the most successful investments I have done by the Precision Group, is because it has got all these advantages and has become the model case for our other projects.

（Shaun Bonett, CEO and Managing Director of Precision Group）