Rarely do we get the opportunity to look at commercial and industrial property investment – the pro and cons – so we talk to someone from a very successful family investment company that specialises in this area. Annabelle Chapple will share her thoughts.
Kevin: When it comes to investing, there are all different types of investing with property. We’re going to focus in this talk on commercial industrial investment, which is something we don’t do a lot of and we should do more of it.
I met recently a young lady whose company does this exclusively. Annabelle Chapple joins me. She is the asset manager for Ashdown Property Group.
Annabelle, thank you so much for your time.
Annabelle: Thank you for having me, Kevin.
Kevin: Tell me about your company. I mentioned in the introduction there that you specialize in commercial industrial investment. Is that exclusively in that area?
Annabelle: Yes, ideally. We have a CBD building that my grandfather bought quite early on in the piece and also, another building in the valley, but otherwise my grandfather has always been of the mindset that he’d like properties that he can hose out.
Kevin: All right. That was the criteria.
Annabelle: Yes, that’s the criteria. To give a bit of background on how we came about, it really was through my grandfather Cliff Ashdown – he is still with us, so he’s still alive and kicking – and [1:09 inaudible] Ashdown. They’re both still very much involved. They built an auto parts business, so it was really grit and sweat and tears that they made that quite a big business and sold that, and it was through that capital that we went in to it to property investment.
My father – Nick Carter – had worked in property for many years. He also owns his own property management business, which he’s just starting to step away from. And my husband is the Queensland head of capital transactions at Savills. So, I have very much a property family.
I’m relatively new to this role, however I think that sort of outsider view is helping me view it from the top down.
Kevin: It sounds to me like you were born into it, and the conversations around your table must be all about property.
Annabelle: They are, and I resisted it for a long time as an ex-TV journo. I’ve been in that industry for about five years before I came in to this one. It was probably inevitable from everyone else’s point of view, but I’m really surprised how much I’m enjoying it.
Property, as you know, has so many moving parts; it’s not a one size fits all approach. So, I’m really enjoying tackling it and trying to figure out the best way to get tenants and solve all the issues that come up with all kinds of real estate.
Kevin: Talking about cycles there for a moment, is this a good time to be considering commercial industrial investment?
Annabelle: I think that if you’re a long-term investor, you should always be considering investing in the commercial industrial investment market. And if you’re a believer in Brisbane as a growth city and Asia-Pacific, the demand for commercial real estate should always be stable – with some ups and downs, as any investment market has.
Kevin: We’re all very familiar with the property cycle in residential. Is it similar in commercial industrial?
Annabelle: In some ways, yes, because the availability will always drive that investment demand, so interest rates at all-time lows is assisting with demand. That’s still relatively easy to obtain if there is sufficient equity in each transaction. So it is the same as residential real estate, or similar, in that sense.
Kevin: Yes, there’s a lot less emotion in industrial commercial. You don’t get caught up in the emotion. It’s all about the return, isn’t it?
Annabelle: Yes, absolutely. It’s a funny market at the moment. There are a lot of unoccupieds flooding the market. So, as owners of warehouses, we’re struggling in some instances to find tenants because they’re happy to go and buy their own. It’s being mimicked in the CBD as well where the tenant is king in this market, so people are willing to do anything to attract them and to keep them.
Kevin: Because it’s based on return, is it more difficult to secure funding for commercial industrial property?
Annabelle: Yes, it is. The commercial risk is higher. For example, if you borrowing to buy an industrial property and your tenant leaves, your down time could be anywhere from a week to an entire year or longer, so it can hurt cash flow. Whereas in residential, for example, it’s obviously much easier to secure a tenant because they need to live somewhere.
Kevin: What would be your suggestion for someone wanting to start building a commercial portfolio? You mentioned there that astute investors – and I agree with you – should always be looking at these sorts of opportunities. For someone who’s in residential now, deeply into residential, and they think “Well, I’d like to broaden it,” where should they start?
Annabelle: Firstly, I’m the third generation, so I can’t really talk about the financial side because I’m very lucky to come in to that with my family. But in terms of starting, in terms of knowledge, it’s starting with what you know: is there a retail shop or an office or an industrial property that you drive past regularly or visit regularly that you’ve always liked and always felt that it was good real estate? That’s a great place to start. What you know is the base, and that’s one that my grandfather Cliff pushes.
Another one is commercial agents also generally have a lot of knowledge on the market, so just start a conversation. Just go and inspect a property you might be interested in and start a relationship with the agent. They will want to share their market reports and research with you.
There’s so much information out there and a lot of transparency also in the Australian market, so if you’re interested, you can get right amongst it.
Kevin: Yes, it comes out of education doesn’t it? I was going to ask you about the relationship with the agent. You touched on it there. It becomes very important. Obviously, over the years, you would have watched your father, your grandfather as well, build relationships with agents. Do you find that they have the core agents they work with who will refer to them?
Annabelle: Yes and no. It sort of chops and changes. My dad is very much the leader in maintaining relationships with agents and he believes in being very fair. He was an agent once himself – that’s how he started out – so he believes in not really sticking to the same guy all the time. He believes in picking the best guy for the job, which I think is a great thing to do, and it also gives you a lot of perspective on your assets. You might get three different agents giving you their advice, and then you make a decision from there.
I personally like getting in touch with the agents now that I’m doing this day to day and tapping into their advice, and I’ve found them so willing to come forward with their help. But I suppose keeping it to a limited group; you don’t want to have 50 agents on your call books. It would get a bit exhausting.
So, if you have your favorite group of industrial guys, your favorite group of commercial, and get their three opinions on your properties, then you’d be in pretty good hands.
Kevin: I would imagine from listening to you in the conversations that you and I have had off air that you have a fairly healthy portfolio within the property group. Are you constantly looking at that, reassessing it, maybe trimming off from the bottom, or do you have a strategy of buy and hold?
Annabelle: Yes, that’s interesting. That’s essentially why I’ve come on in the role. My dad was doing this asset management side of the business for free while he was also running his own property management business, managing properties for other clients as well. So I’ve come in because dad is over 60 – I probably shouldn’t be telling you that – and he is wanting to retire and have a few more weekends at the beach. So, I’ve taken on the role of taking the helm and going “What needs to be cut away? Or what can we do in small ways to make this property more attractive?”
Simply, in the building I’m in, 150 Edward Street in the CBD in Brisbane, I work out of this office and it’s the CBD building we own. And I’ve done tiny things, like changing soaps in the bathrooms and putting diffusers in, which are those scented things in the bathroom. Tenants have already noticed it.
So, you can look at the macro, but it’s really important to also look at the micro, and I think that’s where my family is really relieved that I’m here because there’s a massive list of things I could do to each property. It’s everything down from how the fences operate to whether the shed has columns in the center, to when you come into the CBD, what the toilets are like.
Kevin: You’re obviously on a massive learning curve. It’s been fantastic talking to you, Annabelle. I wish you every success with your future and what you’re doing with the company. Thank you for spending some time with us today and sharing a bit of that knowledge. It’s been great talking to you.
Annabelle: Thank you, Kevin. Really great talking to you and really enjoying your podcast. It helps me get a great understanding across the market as well, so thanks so much.
Kevin: Thank you.