The owners of four retail shops, located on the periphery of a retail hub in one of Sydney’s prime residential suburbs, had been receiving regular annuity income for the past seven years.  However, the impacts of COVID-19 meant that their tenants could no longer pay rent.  The prospect of the tenants recovering their businesses was considered small. The likelihood of ongoing vacancies was high. And the forecast rent return was projected to be less than it was before the COVID-19 pandemic began. 

With uncertainty surrounding the property sector, the owners wanted to investigate the available options that optimised the value of, and return from, their investment.  Whilst the owners were capable investors, they were not experienced in reviewing asset strategy, change of use and redevelopment.  DA Properties was engaged to help the owners achieve clarity on their investment’s future direction.

DA Properties was able to capitalise on its experience, knowledge and relationships in investment and development to consider various scenarios for the existing retail format and a new residential redevelopment. The analysis provided three options and identified a ‘stand out’ solution. The inferior options included continuing to use the property for retail and repurposing the current improvements for commercial use.  The third, and best, option was to pursue residential development because it would produce a superior return that could be realised at the development approval stage. Subject to the owners’ appetite for providing additional capital, time and development risk, further gains could be achieved by also delivering the approved development. The final finished product could then be sold for profit or retained to generate annuity income.

Following DA Properties’ analysis and advice, the property owners were offered a range of options to navigate their investment path through the COVID-19 economic recovery. They settled on a clear, and superior, outcome to optimise their property outcome and will commence the development application process in the near future. DA Properties will continue to support the clients through this process.