Fractionising makes sense for a business on the move.

One of the stories I mostly like about the power of fractionalisation was when a major self-storage operator joint-ventured with a property trust many years ago.

At the time, I was specialising in the sale of self-storage facilities and acting on behalf of each facility owner. In those days, in the main, facilities were owned by families. Each time, when one particular large storage operator successfully outbid other buyers, a request was made that a specialĀ  contract was produced other than the one that the vendor had prepared as they do ordinarily.

This sale contract was different in that on settlement, the freehold was transferred to a property trust and the business, ie the self-storage business, was transferred the self-storage operator. At the time the self-storage operator had around 5 or 6 other facilities.A lease betweent the self-storage business and the property trustĀ  was later agreed internally.

Thereafter, the property trust would later go and fractionise the properties to smaller investors. It would be a beautiful deal for the fractional investors, as they would have a stake in this self storage facility, with a leaseback to the self-storage operator guaranteeing freeflowing income generated by the thousands of storage rent payers storing at each facility.

And it gets better than that!. The self-storage operator would continue to expand with each new business acquired bringing more cashflow with the added feature of a limited demand for additional borrowing

To me it least it seemed a terrific deal for all parties, because it meant that the self-storage operator was not limited to how much it could borrow to acquire each new facility, the property trust had a continual supply of new investments to offer fractional investors and the fractional investors themselves had the access to the free-flowing income generated from the self storage facility. No surprise that the self-storage operator expanded expodentially from there.

And then, there was one extra killer feature, the self-storage operator ultimately purchased back all the freeholds from the property trust and this unification of business and freeholds, added massive value and control back into their business.

If you would like discussing how we could potentially fractionalise your property, to access equity today and perhaps even acquire the properties back down the track, please call to discuss at any time on rob@boxcom.com.au

 

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