Commercial Property Investment in Australia

Highway-frontage properties in retail, fast food supplies (e.g. McDonalds), service stations and showrooms are usually stable businesses with good turnover. The tenants generally take out reasonably lengthy leases and the properties subsequently offer better rental returns.

Land increases in value, buildings depreciate in value

Before investing in any property, it is important to ensure the growth in the land value will offset the depreciation of the building over time. For example, a residential strata unit in a multi-level apartment building is only entitled to a very small part of the land. In effect, this means the purchase price of the total property is mainly composed of the cost of the building rather than the land component. Understandably, over time, the strata residential unit will struggle to increase in value, as the depreciation of the building offsets any increase in the land.

Investing in commercial and industrial property works the same way in terms of preservation and growth in value. However, the building on the land generates cash flow to assist us in owning the land.

Our preference for the small commercial property is:

  • Have a modest construction, i.e. not too young so the bulk of the new building depreciation has been depleted, but not so old as to cause maintenance issues; and
  • Can be easily leased, so visibility on a major road or highway location is preferable.

Speak to your DomaCom accredited adviser, or participate in the following public crowdfunding campaigns for commercial property.

Sapphire Wind Farm Community Co-Investment
$3 Million
New England region
Northern NSW
Est. Return
6%
LAND BANKING – BADGERYS CREEK – LOAN
Land Banking - Badgerys Creek – Loan COMPLETED
$2.0 Million
Badgerys Creek, Sydney
NSW
Est. Return
9.56% return#
Utilitas bioHub
$4.3 Million
Casino
NSW
Est. Return
8%#
Genius Energy - Solar Farm
Genius Energy - Solar Farm
Applications Open

QLD
Est. Return
8%#
Townhouse Development Adelaide
$750,000
Adelaide
SA
Est. Return
4%#
ONLY Flemington Swimming Pool
1 - 2 1 - 2 0 - 1
$7.9 Million for all 20 apartments
Flemington
VIC
Est. Return
5% gross#
Specialist Disability Housing Fund
NDIS - Specialist Disability Housing Fund
$10 million
City And Regional Areas
NSW, QLD, ACT
Est. Return
10% p.a.#

 
Risks for Property Sub-Funds

Risks

Refer to Section 7 of the Risk section of the PDS for an explanation of the risks involved in an investment in the DomaCom Fund and the general risks associated with property markets.

Specific risks of this investment:

Property not acquired – If there is insufficient investor interest the property will not be acquired however Investors with an Active Bid will all be proportionately liable for the Campaign Costs. A list of approximate campaign costs is set out below.
Value changes – The value of an Investor’s investment will go up and down in accordance with the value of the Underlying Property. There is no guarantee that the value of the investment will increase, and it may in fact decline in value.
No guarantee – Returns are not guaranteed, and Investors may lose some or all of their capital. The nature of this investment is to expect an appreciation in the value of the units, with little to no income to be paid to investors during the term of the investment. There is no guarantee that this expectation will be fulfilled.
Past performance – While this area in which the underlying property is based has experienced capital growth in the land value in the past, this is no indication it will increase in value in the future.
Liquidity risk – An Investor cannot withdraw from the Sub-Fund until the Sub-Fund is terminated, and the Underlying Property is sold. DomaCom does intend to offer a facility through which Investors can seek to sell their Units to another party, however there is no guarantee of this.
Damage or loss – There are a range of events that can damage the Underlying Property including acts of God (fire, flood, earth quake and other natural disasters) through to accidents, negligence, and failures of maintenance. While insurances will be in place it may not cover or may not fully cover such losses.
Insufficient income – The costs associated with Underlying Property may exceed its income, however if there is a shortfall Investors will be given an opportunity to subscribe for additional Units in the Sub-Fund to meet those expenses pro rata to their Unit holding in the Sub-Fund. Investors who don’t subscribe for further units will have their investment in the Sub-Fund diluted.
Vacancy risk – a property manager will be appointed to manager the property and secure tenants to tenant the property and derive income from the underlying property. If tenants are not secured there is a risk that the property will not generate the income that has been budgeted for. If this were to occur the investors may be required to raise further funds to offset the expenses of running the property.
Unexpected property event – The risk that the Underlying Property may be negatively impacted due to a property specific event, for example, a change could occur to local zoning rules, development of competing and other events that were not anticipated at the time of acquisition.
Economic risk – There is a risk that the general economic conditions in Australia may change in relation to interest rates, employment rate and economic growth that could in turn have an impact on the Property market and specifically the value of the Underlying Property.

Fees and Costs

Refer to section 13 of the PDS for Fees and Other Costs

The Management Fees for managing your investment

    • Cash held in your Cash Account 0.22% p.a.
    • Property Sub-Fund 0.88% p.a. of the Gross Asset value of your investment
    • Loan Sub-Fund 0.44% p.a. of the Gross Asset value of your investment

Campaign Costs
Set out in the table below is illustration of the campaign costs that are likely to be incurred. An Investor who participates in a Campaign and has had an Active Bid which fails to result in the formation of a Sub-Fund will be liable (in a proportion that is equal to the amount of their bid divided by the sum of all Active Bids at the time the Campaign costs were incurred) for the Campaign costs incurred by DomaCom. The investors will be only liable for Campaign costs and Acquisition costs that are set out below if the Sub-Fund was not created, as these costs have been incurred prior to the acquisition of the property.

The settlement costs set out below are only incurred and payable if the Sub-Fund is created and the property acquired.

If the Sub-Fund is established, these costs will be deducted from the Sub-Fund and only those investors that accept the SPDS will incur the on boarding costs – Campaign, Acquisition and Settlement costs.

The costs below are an example of the campaign costs, the actual costs may differ and will be set out in the SPDS.

Campaign Costs Estimates
Contract review and title search $500-$1000+GST
Building inspection and pest report $500-$1500+GST
Property valuation report $500-$5,000+GST

Acquisition costs

The following costs will be incurred, whether or not the property is purchased.

Acquisition costs Estimates
Legal costs (if contracts require further amendments $2,000-$2,500+GST

Settlement costs
Below is an estimate of the following Settlement costs if the purchase is successful and a Sub-Fund is created. These costs will only be incurred if the Property is purchased and will be paid from the capital raised on the acceptance of the SPDS.

Estimated Settlement Costs Estimates
Conveyancing costs $1000 – $2,500+GST
Stamp Duty Varies based on state and Property Value