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Cambridge Street

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Syndicate Performance Summary

Date of Aquisition: March 2011
Sale Price: $3.725M
Disposal Date: June 2013
Average Annual Return: 27% (income and capital)
Capital Growth: 49% in under 3 years
Capital return to unit holder: 55% (including return of initial equity)
343 Cambridge Street was acquired by the Scope in March 2011 for $2.5 million and represents the first property in the Scope portfolio to be disposed and fulfill the syndicate lifecycle.

On acquisition the property had 3 incumbent tenants all of who were paying well below market rent on short term leases, Dermalogic Pty Ltd (511 sqm), LJ Hooker (84 sqm) and Commonwealth Bank of Australian (ATM 9 sqm).  Within 12 months this position had changed considerably for the better of the syndicate.

By December 2011, Dermalogic had defaulted and eventually abandoned their tenancy.  Thankfully as part of the acquisition process, Scope had negotiated and secured not only a better rent but also rental bonds that were duly called upon.  During this time, Scope also made the decision not to renew the lease with LJ Hooker and renegotiation of the licence agreement with Commonwealth Bank of Australia for the ATM, failed to achieve a satisfactory outcome for all parties.

Whilst these events saw members of the syndicate endure a relatively short period without distributions, the outcomes achieved by Scope, with new tenants far outweighed the short inconvenience.  Scope successfully negotiated for 2 new ATMS to be installed on the site.  More than doubling the rental income along with 2 new tenants to replace LJ Hooker and Dermalogic.  These efforts resulted in a fully tenanted property generating net income of approximately $245,000 per annum that transferred into a considerable uplift in value of the property to $3.47M in just over 2 years.

With this uplift in value and more importantly the change in appetite of private buyers looking to purchase assets of this nature, it was put to Unitholders to vote on their willingness to dispose of the asset and wind up the syndicate early.  Unitholders voted unanimously in favour of disposal of the asset over the value of $3.7M.  To this end an offer was accepted at $3.725M ($255,000 above valuation).

Although 343 Cambridge Street provided several challenges, the result for the syndicate was outstanding.

 


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