In April 2018 the Brothers Sporting Club freehold in Bundaberg was offered for sale with a leaseback.
The club itself, founded in 1947, offered an established entertainment and sporting facility inclusive of two restaurants, a café, gaming & sports bar, beer garden, auditorium, conference centre and sporting fields all of which was built on a massive 8 Ha of land. On the land, the club offered a bowls club facilities netball courts, cricket nets, rugby league and AFL field – with all these facilities, the members were incredibly fortunate.
Our clients, the ultimate purchaser, and a licensed a fund manager, was looking to acquire an investment which they could offer to their base of co-investors. They identified this property investment as an opportunity for their investors and negotiated to acquire the property at $10.9M which if successful would show an initial yield of around 10% per annum.
Ultimately, the club agreed to sell the property to our client. The fact that our client was able to offer a buy-back to the seller after 5 years gave them the edge in the negotiation. Buy-backs whilst unusual, can offer sellers a pivotal reason for discerning between one buyer or the other. Anyway. the sale proceeded, and the marketing of the fractional co-investment or syndication began.
So, in May of 2018 the investment was offered as a fractional co-investment or syndicate with the term of the investment of 5-7 years and cash returns forecasted at 9.5-10.25% per annum over the first 3 years. Investors were also advised that the club had an option to purchase the property back after a 5 year term.
The Result
The property was sold back to the club in 2023 as they excercised their option to purchase for $19.2M. This meant, during the period of the investment, investors would earn an average annual distribution of approximately 8.9 cents per $1 unit. This income was a little bit less than forecasted, however, the club was forced to close during covid which affected rental payments.
The fund manager anticipates a capital return of approximately $1.71 per unit to investors after settlement (each investment unit was offered at $1). This, is in addition to the income recieved. So, overall expected income and capital return equates to average earnings per unit of approximately 23 cents (23%) per annum over the 5 year period.
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Important information. Investment syndicates or factionalised investment like these are generally only available to “wholesale” clients as defined under the Corporations Act. The information is of a general nature only. An investment in a syndicate is subject to risks associated with ownership, leasing, its general operation including possible delays or suspension of payments, loss of income and principal invested. The stated returns are not promised or guaranteed on any future investments. Should you proceed with an investment into any fund referrred by Box Commercial we will receive an introduction fee of 2.2% (inclusive of GST) of the capital invested.
