Cromwell properties have a higher lease retention than our competitors as we treat each tenant as a client, the same as investors.
Patience has been paying off for the team at Cromwell Property Group, who have made a point to not let market pressures and conditions dictate their investment strategy.
“We’ve taken an active approach to property management,” Cromwell commercial property director Michael Blake says.
“We take a cyclical approach to property investment, so we’re happy to sell when the market is hot and buy when it’s better.”
This is the opposite of the approach taken by many of Cromwell’s competitors as property investors tend to be trend driven and reactive to the market, Blake explains.
“Lots of competitors buy at the top of the market and are forced to sell when the market corrects itself,” he says.
Through being conservative and fussy, Cromwell sold a number of properties when the market was high in 2007, and then bought up heavily in 2008 and 2009 to take advantage of the numerous cheap assets available.
“Over the past 12 months we’ve been fairly defensive [in our investments],” Blake says.
“We think there’s a bubble in the prime property market which has been created by the weight of foreign money coming into Australia.
“Foreign investors want to buy the best property in the best street, so we’ve been selling to them and looking to reinvest.”
The property bubble is expected to burst soon, most likely within the next 12 months, at which time Cromwell will again start to aggressively purchase assets as its competitors begin to reactively sell, he says.
“We think there’ll be some sort of correction in the market in the next 12 months, and rising interest rates might be the trigger; it won’t continue forever,” he says.
“When the foreign money pulls out, there will be more opportunities for us [but for now] we’re very cautious.
“We’re not going to try and compete and pay selling prices, so at the moment we’re prepared to sit back and be cautious with our acquisitions.”
This caution has limited Cromwell to acquiring only one new investment for 2014 and establishing only one syndicate earlier this year.
“We’re not too greedy,” Blake says.
“It’s very easy to go out and buy any building and tell investors to put money in it, but we’re pretty fussy [when it comes to investment criteria].
“We’re an active manager with a focus on generating income for our conservative clients, so we tend to prefer properties with long-term leases.”
This means single tenant leases of 10 years and multiple tenant leases of five years are ideal, he adds.
Coupled with high-quality tenants, this provides Cromwell with plenty of time and flexibility in which to sell, so the company isn’t pressured by market trends.
“[We like to have] good-quality buildings and a mix of tenants who have different maturations in their leases,” he says.
Indeed, these tenants are highly valuable to Cromwell, which ensures all of its buildings have in-house property management, allowing for better relationships with tenants and extending the building’s tenant retention rate.
“Cromwell properties have a higher lease retention than our competitors as we treat each tenant as a client, the same as investors,” Blake concludes.
Award winners
Class Super: SMSF accounting software/administration
Cromwell: Property
Macquarie: Cash and term deposits
FIIG Securities: Fixed income
Westpac: Residential property loans
CommSec: Australian shares
TAL: Insurance
BT Wrap: Investment platform
Magellan: International shares
