The Importance of a Quality Asset Manager
The value of a knowledgeable and proactive commercial asset manager can represent tens, or even hundreds of thousands of dollars, for investors over the term of a lease.
Every investor should be looking for a commercial property manager who has:
- At least a couple of years’ experience in commercial property management;
- An excellent grasp of market rates their properties are in;
- Insights into the in-demand and emerging requisites of tenants and how to value-add to the asset at lease and sale time;
- Forward-planning experience so the maintenance schedule keeps the asset compliant and working at its optimum level;
- In-depth understanding of the various legislative requirements of retail, office and industrial.
From warehouses to strip retail shopfronts and strata-office spaces, commercial property assets continue to attract investors for the security of long-leases, annual rent increases of 4% or CPI and their history of strong performance compared to other investment classes.
City and non-metropolitan asset yields vary widely, but a quality asset manager will structure a lease that meets the investment objectives of the client. And when it comes time to divest, a quality asset manager will have strategically positioned the property for a favourable valuation.
LJ Hooker Commercial Macarthur, led by Directors Aaron Ward and Darren Zammit, has supported the wealth creation of hundreds of investors over the last two decades, acting as a trusted adviser in their commercial property decisions.
The agency manages well over $1bn worth of assets for clients throughout the Outer Southwest Sydney corridor.
From high-net-worth investors with multiple assets to investors with a single property, syndicates to business owners utilising their Self-Managed Super Funds, the Macarthur office manages properties for a broad range of investors.
“As a business, we’ve always had a high focus on asset management within our broader service offering,” said Ward.
“We've sold some investment properties multiple times, have re-let them for the new purchaser, and then brought them back into the management portfolio for further value-adding.”
Over the last 10-15 years, asset managers have proven their worth to investors.
Asset managers no longer simply collect the rent and arrange trades for emergencies; they’re now trusted advisers for clients.
Ward said: “Clients have called me for my advice on how to best structure their lease agreement and help them forecast when they’d be able to next add to their investment portfolio. Rather than talk to their accountant, they turned to us to assist with designing their strategy for the next acquisition. That’s an indication of how the relationship between agencies and clients has changed and the value we can bring to the table.
“We've had some clients start with us with a single property, and we’ve now helped them build-up their portfolio to 15 properties worth in excess of $100m.”
Commercial property management can be complex. Owners of small strata-titled assets who think they can muddle their way through managing the asset themselves run the gauntlet of risk.
Even experienced residential property managers are confounded by the demands of commercial regulation and best-practice management.
“We’ve been referred a lot of commercial managements from residential property managers because they’re not familiar with the relevant legislation and are worried about being liable for non-compliance,” said Zammit.
“For instance, the NSW Retail Leases Act (1994) can be complicated and unless you’re dealing with it week-in, week-out, it can be a minefield for compliance. And when you’re not across its detail, trying to navigate it can also be very unproductive, and that has wider impacts on the wider service of your management portfolio.”
In one instance, an investor approached LJ Hooker Commercial Macarthur suspecting their portfolio, under the management of a residential property agency, was underperforming.
“The portfolio was being mismanaged and was also well under market-rent. Tenants were on gross lease agreements and the client was given incorrect information regarding lease structure to optimise asset performance,” said Ward.
“The tenants were on month-to-month leases so we restructured the leases, repositioned the former tenants and attracted some new A-Grade tenants and readjusted the return by almost 50%.”
LJ Hooker Commercial Macarthur has created specialisations within its four-person asset management team and two assistant asset managers. They’ve separated retail managements from office and industrial.
Ward said: “Because of the intricacies of the different sectors, we thought it was best to have specialists in the different areas rather than having them dabble across all (sectors). Retail, in particular, is very different in its nature and application.”
LJ Hooker Commercial Macarthur prioritises professional development so the asset managers are best positioned to service their clients’ ongoing needs.
“We participate in the PCA’s professional development courses and we’ve also brought-in solicitors to brief us on new legislation and recent interpretations of the Retail Leases Acts through the courts,” said Zammit.
“Continually improving our professionalism provides both our managers and our clients with greater confidence in the relationship.”