Strategic Assessment - 424 Gympie Road

The Strategic Assessment Process

Introduction to Strategic Assessment

Thank you for trusting us to complete this Strategic Assessment of your asset at 424 Gympie Road.

This property has served you very well over the years, but the upcoming vacancies and some potential maintenance and refurbishment requirements make this the perfect time to assess your property.

Our challenge over the next quarter is to help you make the right decisions that will ensure your property continually aligns with your investment priorities.

The following five-step assessment is designed to identify the factors mostlikely to impact your investment property’s performance and to capitalise on any potential opportunities for improvement.

Trevor Nelson-Jones

Sales & Leasing Executive

0407 736 521

trevor.nelson-jones@raywhite.com

STEP 1 - We clarify your investment goals for this property

STEP 2 - We assess your property’s current financial performance

STEP 3 - We assess where your property sits in the Building’s Lifecycle

STEP 4 - We assess your property’s projected performance

STEP 5 - We recommend actions to ensure your property continues meeting your investment goals

What are the most important investment outcomes for you?

Ten Things to Consider

1. Return on Investment (ROI)

Maximizing their ROI is often the primary goal for commercial property investors. They want to ensure that their investment generates a competitive rate of return.

2.

Investors often prioritise consistent cash flow from rental income. Positive cash flow can help cover expenses, maintenance and provide a steady income stream.

3. Property Appreciation

Long-term property appreciation is a significant priority, as investors aim to build equity and benefit from potential capital gains.

4. Risk Management

Mitigating risks associated with the property, such as market fluctuations, vacancy rates, and property management issues, is crucial for investors.

5. Location Location is a key consideration. Investors seek properties in areas with strong economic fundamentals, growth potential, and accessibility.

6. Tenant Quality

Securing A grade tenants who pay rent on time and have long-term leases, bonds and guarantees are essential for stable cash flow and property value.

7. Lease Terms

Favourable lease terms, such as escalations, lease duration, and tenant responsibilities, can significantly impact an investor’s return.

8. Property Management Investors often prioritize efficient property management to minimize vacancies, handle maintenance, and ensure tenant satisfaction.

9. Sustainability & Environmental Impact

10. Tax Benefits

Some investors prioritize sustainable and environmentally-friendly properties, seeking opportunities to reduce energy consumption, minimize waste, and meet green building standards.

Understanding and maximizing tax benefits, such as depreciation, 1031 exchanges, and deductions, is essential to optimize the financial performance of the investment.

Cash Flow

The Strategic Assessment Process

Step 1 Your Investment Goals

Based on our understanding of your investment goals, the three factors Most Important to you are

1. Return on investment

2. Cash flow

3. Risk management

These are three very strong pillars to build on, but require some balance. Return on Investment and cash flow have been very strong over recent years for you, but we are now in a position where decisions are necessary that may impact these in the short term.

The factors we believe are Somewhat Important for your goals are

1. Property appreciation

2. Lease terms

3. Property management

We will ensure these are factored into any recommendations, but not at the expense of your top priorities.

The factors you identified as Less Important were

1. Tenant quality

2. Environmental sustainability

3. Tax benefits

We will still look for opportunities to add value in these areas but will not allow them to be an expense, a distraction or to diminish any of your other priorities.

Step 2

Your property’s current financial performance

Financial Summary

Income

Strong tenancy stability over recent years has meant this property has performed exceptionally well in terms of income continuity, providing a net annual income of just under $400,000

Expenses

Outgoings are in line with other buildings of this type and age, though we have been fortunate in recent times to have avoided any major capital works.

Tenancy schedule

The tenancy schedule attached shows variable lease expiries with good historical continuity of income. However, we have a situation now emerging with some tenants vacating. This is addressed in Step 4 of this report

Market Analysis

Tenant rent vs market rent

Rents are in line with market values for a building of this age in Strathpine. We are seeing a softening of the retail and office markets in the last six months since the height of the COVID boom, which could impact vacancy periods in the near future.

Value at today’s yields

Based on recent sales of similar aged multi-tenant properties across the Northern Corridor, we anticipate an “as-is” achievable sale yield of 6.5-7%.

The Strategic Assessment Process

OBSOLESCENCE THE FOUR STAGES

Step 3 Your Property Lifecycle DEVELOPMENT HTWORG GNIGA

A commercial building’s lifecycle comprises four stages. Each stage offers its own unique benefits and drawbacks. Our challenge is to ensure your building is in the right stage of life necessary to continue meeting your investment goals.

1. DEVELOPMENT

This marks the building’s birth or rebirth (redevelopment) and requires significant, knowledge, cashflow and appetite for risk.

This stage suits active investors, developers or builders with the specific skills required to manage the construction

2. GROWTH

When the hard work is done, the building enters a stage of strong tenant stability, low maintenance costs and high depreciation. These are often referred to as “blue chip” investments.

This stage suits passive investors willing to sacrifice yield for security and simplicity.

3. AGING

As the building ages, tenants become more demanding and unscheduled maintenance costs become more common for both functionality and street appeal.

This stage suits investors willing to sacrifice security for a higher yield.

4. OBSOLESCENCE

When a building nears end of life, maintenance expenses are constant and tenants are of low quality and short term.

This stage suits investors with the skills, patience and cashflow necessary to prepare the property for redevelopment

Based on our understanding of your Investment Priorities, the properties most likely to meet your investment goals will fall into the Growth stage of the Building Lifecycle.

Based on our understanding of your building’s age, maintenance history and upcoming capital expenditure forecast, we assess your property as being in the mid phase of the aging stage.

Being in the “Aging” stage of its lifecycle, it is likely that this property will require more maintenance expense and have longer vacancy periods than what your ideal investment property would provide.

We have attached a full commercial inspection report for your review, which details all of the current issues identified. Note that not all issues need addressing immediately. We make recommendations later in this report of what repairs we believe will have the most benefit in keeping this property aligned with your investment goals for as long as possible.

The Strategic Assessment Process

Step 4 Your Property’s Projected Performance

For this step, we explore the key elements that could impact your property’s performance in the coming years, both positively and negatively.

Tenant Satisfaction & Lease Expiries

We have just received notification from the Tenants of Units 6b, 7 & 9 that they may not be renewing their lease and vacating the site by the 31 October 2023.

The current street appeal of the building will likely impact our ability to quickly attract quality tenants without significant incentive or potential rent reductions. Age of soft features like carpet and curtains mean we can expect new tenants to request specific refurbishments when making offers.

General Market Conditions

From discussions we have had with Council they have provided us with some insights into their intentions for the area that will prove to be indirectly beneficial to this property in the medium to long term. They have identified Strathpine as the second of three hubs that they intend to invest into to generate redevelopment activity. They are currently investing $44.5 million into Caboolture CBD over the next five years and will then focus their attention on Strathpine redevelopment.

Future Repairs and Maintenance

In addition to our recommended refurbishments, it may be necessary to make allowances for moderate investment into capital works over the next three years.

Step 5 Recommendations for Your Property

OPTION 1: RENOVATE & PROLONG ASSET LIFE

For this option, we aim to complete the maintenance necessary to retain current tenants and attract new ones, without long vacancy. We find with most properties like this, the cost of maintenance are quickly offset by reduced vacancy time and by removing the need to reduce rent to attract tenants.

Recommended Maintenance

1.

The amenities, both female and male toilets, are the area that requires the most detailed and immediate attention. They all function as required and continue to be used. However, the floor covering, and paper towel dispensing units are in dire need of attention. This will be the major deterrent for new tenants and is the number one complaint of current tenants.

We recommend replacing the tile floors and the dispensers for safety and tenant enjoyment.

2.

The front awning and façade require pressure washing and those areas without Tenants signage to be repainted. The underside of the front awning, as well as the walkway also requires cleaning down and painting. We recommend having a painter clean and refresh these areas.

3.

There is one stormwater downpipe missing from the front awning and an issue with a drain at the rear. There is the rusted exit hole in the gutter and a hole in the walkway but the down pipe itself is missing which requires replacing. At the rear, the missing pipe is a minor trip hazard. We recommend having these issues investigated and repaired now before it becomes a more major issue.

4.

The tiled floor in the arcade area requires pressure cleaning and resealing. However, the ideal outcome for this area of the Premises would be to have the current, original, tiles taken up and a new modern tile re-laid. This would give this area of the Premises a fresh, modern and cared for appearance.

This is a major expense and we would only recommend if you planned to maintain ownership of this complex for more than five years.

The car park, bitumen, area overall is in good repair. There are a few areas that should be looked at by an expert to prevent major repair work in the medium term.

5.

This is not an immediate problem and we would only recommend if you planned to maintain ownership of this complex for more than five years.

The Strategic Assessment Process

OPTION 2: REPOSITION ASSET FOR SALE

For this option, we aim to do some minor works that will increase the attractiveness of the building to a buyer that is looking for a more active asset. This option allows you to sell this asset and reinvest into a newer, more passive property better suited to your investment goals.

To achieve this, we would recommend completing the following works over the next quarter, with a view to sell the property in the first or second quarter of next year.

Recommended Maintenance

The amenities will be a concern for any potential purchaser and they will likely try and devalue the property because of it.

1.

To counter this, we recommend sourcing a quote (but not completing the works) to fully refurbish the bathrooms that we can provide to buyers.

2.

Curb appeal is important when preparing a property for sale. We recommend having a painter power wash and refresh the front of the building and some additional landscaping clean-up work completed.

THE NEXT STEPS

Our role is to assist you make better commercial property decisions. We appreciate that there is a lot of information in this report to digest and you now have some important decisions to make. The main decision for you to make is Do I want to keep this property or replace it with one that better suits my needs?

Once we know which direction you choose, we can begin the work of sourcing quotes and having the necessary works completed.

This has been a great asset for you over the years and we, whichever choice you make, we have a strategy that will continue to provide you with a positive investment outcome. No doubt you have more questions so please feel free to reach out and discuss the best way to proceed.

Trevor Nelson-Jones Sales & Leasing Executive

Annexures

RWC Northern Corridor Group

Commercial Inspection Report

Address 424 Gympie Road, Strathpine, QLD 4500

Owner Janflex Pty Ltd

Inspection Date 22 Aug 2023

A visual inspection has been completed on your Commercial Property.

Please refer to this inspection for any important notes or maintenance issues. If a maintenance issue has been reported it will be located below. Please respond with your instruction if a maintenance issue has been noted.

If you have any further questions in relation to the Commercial Property Report, please do not hesitate to contact us.

Thank you,

RWC Northern Corridor Team

Detailed Observations From This Inspection

Inspector Notes

Car park is in fair condition, a few pot holes forming at the entrance of the building, a contractor should be engaged to fill in the pot holes. Line marking is in fair condition & should last a couple of more years. Drain at the very back of the building does have a build up of leaves, this should be cleaned out before storm season to ensure water does not back up from the drain.

Gardens at the front of the building a well maintained, free from weeds & rubbish. It would be our recommendation though to cut the overhanging branches back to stop leaves from falling into the car park & blocking drains.

At the time of inspection we where unable to tell if all external lighting for the building is working. It would be our recommendation that an electrician attends site to ensure all lights in the car park & external lighting on the building is checked to ensure they are functioning.

External walkways are free from any trip hazards, however they appear dirty & look like they need to be pressure washed. The paint that is on the walkways is also faded. It would be our recommendation that all external walkways are pressure washed.

Lighting inside the arcade was not working at the time of inspection. It would be our recommendation that we have an electrician attend site to investigate lighting & provide a quote to have lighting reinstated. Skylight in the arcade requires cleaning. It is our recommendation that with storm season approaching, we have a plumber attend site, clean out the gutters & pressure wash the skylight at the same time.

The toilets for this complex are in poor condition & require some urgent maintenance. Even though the toiles are cleaned regularly they look dirty. From the photos below you will see that all the tiles are cracking / lifted / removed. The Paper hand towel dispensers are rusted & require replacing. It would be our recommendation that we get quotes on replacing all the tiles in all toilets & upgrade the paper hand towel dispensers. Lighting is working. Paint is in fair condition

At the back of the building part of the guttering is rusted out, it would be our recommendation to have this looked at before storm season. All roof gutters should be cleaned before storm season to ensure there is not a build up of leaves. Guttering is starting to look old & dated, it would be our recommendation to obtain quotes to have the guttering on the building repainted.

Commercial Inspection Report

Photos | Page 1

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Pot Hole forming at front of car park.

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Pot Hole forming at front of car park.

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Pot Hole forming front of car park

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Cracked walkway front of building

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Cracked walkway front of building

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Car Park

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Awning back of building

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Back of Building

1300 255 075 (Option1) PO Box 1111, North Lakes QLD ncg.support@raywhite.com

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Cobwebs Back of Building

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Car Park

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Rusted out Guttering back of building

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Overhanging Trees in Back of Car Park

Commercial Inspection Report

Photos | Page 3

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Over hanging trees back of car park

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Car Park

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Toilet

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Lighting in Toilet

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Cracked & Lifted tiles in toilet

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Toilets

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Cracked & Missing tiles in Toilet

Photos | Page 4

1300 255 075 (Option1) PO Box 1111, North Lakes QLD ncg.support@raywhite.com

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Sink in Toilets

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Dirty Tiles in Toilet

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Toilets

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Dirty Tiles in Toilet

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Sharp Rusted Paper Hand Towel Dispenser

Commercial Inspection Report

Photos | Page 5

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Bitumen missing back of Toilet

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Missing Tiles in Male Toilet

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Sharp Rusted Paper Hand Towel Dispenser

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Sink in Toilet

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Cracked Tiles in Toilet

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Cracked Concrete Back of Toilet

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Missing Tiles in Male Toilet

Photos | Page 6

1300 255 075 (Option1) PO Box 1111, North Lakes QLD

ncg.support@raywhite.com

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Cracked Concrete back of Toilet

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Missing Tiles in Male Toilet

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Sharp Rusted Paper Hand Towel Dispenser

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Broken no Smoking Sign back of Building

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Pot Hole Forming in Back Car Park

Commercial Inspection Report

Photos | Page 7

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Water Marked Soffit

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Hole in Awning Back of Building

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Overhanging Tree Branches

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Paint Coming off External Walkway

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Dirty External Walkway

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Inside of Arcade

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Dirty Air Grills in Arcade

Photos | Page 7

1300 255 075 (Option1) PO Box 1111, North Lakes QLD ncg.support@raywhite.com

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Front of Tenancy

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Hole in Ceiling Space of Arcade

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Front of Tenancy

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Water Damage on Ceiling space of Arcade

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Dirty Skylight in Arcade

Commercial Inspection Report

Photos | Page 8

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Lighting not working in Arcade

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Scratched Tenant Window

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Lighting not working in Arcade

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Front of Arcade

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Light Shade coming out of Ceiling Space

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Front of Building – External Walkway

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Marks on Awning of Front Ceiling Space

Photos | Page 9

1300 255 075 (Option1) PO Box 1111, North Lakes QLD ncg.support@raywhite.com

Taken : 21/08/2023

Front of Building

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Tenant Signage

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Front of Building

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Front of Building

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Dirty Gutters Front of Building

Commercial Inspection Report

Photos | Page 10

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Tenant Signage

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Tenant Signage

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Dirty Awning Front of Building

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Missing Downpipe front of Building

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Faded Walkway – Front of Building

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External Walkway Front of Building

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Broken Telstra Tele Com Box

Photos | Page 11

1300 255 075 (Option1) PO Box 1111, North Lakes QLD

ncg.support@raywhite.com

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Pot Hole in Back of Car Park

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Broken Telstra Tele Com Box

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Broken Telstra Tele Com Box

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Drain filled with Leaves back of Car Park

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Drain filled with Leaves back of Car Park

Commercial Inspection Report Tenancy Schedule

Contact John Power - site manager john.power@matchworks.com.au

Contact Ryan Taylor (Guarantor) 22 Wyperfield CCT, Pimpama QLD 4219 ryan@glidephysio.au

Primary Contact Ryan Taylor (Guarantor) 22 Wyperfield CCT, Pimpama QLD 4219 ryan@glidephysio.au

Tenancy Schedule

Kristie Tsang finance@liveslivedwell.org.au

Income & Expenditure Budget |