In the commercial property sectors there are three distinct capital stages in the evolution of property. Starting from development potential through to a completed and fully tenanted income-producing property, the capital/funding strategies and the investor profiles for each stage differs quite significantly.
C2 Capital operates over all of these three stages to provide investors with options to participate in high-value, wealth-creation opportunities. These three stages are listed below.
In any acquisition, there needs to be the following elements;
Once a site has been identified and a contract of sale negotiated, a deposit on the purchase is required which can be 5-20% of the agreed price. Then to
This stage has both the highest risk and the highest reward. It attracts equity investors who have an understanding of what is involved and are comfortable with the projects risk profile. The timeframe for this phase can vary from three months to a couple of years.
Investor profile - wholesale and institutional
Once a DA has been granted and pre-commitments of sales and/or tenants have been achieved (that facilitate development funding facilities), then the development moves into the construction phase that takes it from a site through to a completed property.
There are two main parts at this stage; the debt capital stack and the equity component. The investors who come into this stage in most cases have a clear exit and are involved in the journey from commencement to completion. There are still risks in this phase however unlike the previous stage many have already been mitigated.
The investment timeline in this stage can range from 9-24 months and returns can be from a coupon through to equity participation in the development profits.
Investor profile - Wholesale and institutional
Now the property is completed and tenanted, the majority of the risks have been removed and its value has been optimised. Therefore, the returns take on a different nature and are in two forms being;
Income returns - rental income streams less management costs. There returns usually have tax benefits as a non-cost tax offset of depreciation write downs - resulting in no tax being payable on a portion of this income.
Growth returns - Property historically has gone up in value resulting in capital gains. This growth tends to be cyclical and at the same time over the longer time frames delivers a reasonably consistent trend line of capital growth.
The investors who invest in this stage are looking for consistent income streams and growth on their capital so that it out-performs inflation rates.
Investor profile - retail, wholesale and institutional.