RW Capital was attracted to the pub/hotel sector as assets were often situated within walking distance to train stations and had vacant land which presented development opportunities.
All three assets had a primary focus on gaming and were acquired on 9-10.5% passing yields against a backdrop of yield compression.
RW Capital strategy centred on enhancing net income through implementing new management, refurbishment and capital expenditure to create new gaming rooms.
The pubs/hotels saw net incomes rise by 23–25% as a result of RW Capital strategy. The increase in net incomes along with capital improvements allowed the properties to benefit from yield compression upon sale–generating the attractive IRRs noted above.
601 Coronation Dr
611 Coronation Dr
Toowong’s proximity to the Brisbane CBD appealed to RW Capital as a growing fringe office market near the main Toowong railway station and university. Each of the properties possessed development potential.
601 Coronation Dr (greenfield office development):
RW Capital focused on optimising the development approval, securing pre commitments for 40% of the available space and appointing a builder on a fixed price contract.
611 Coronation Dr (pivoting to realise the highest return):
RW Capital pivoted from a strategy of developing the office building to selling the building to Scape. RW Capital recognised an opportunity to take advantage of the demand for student accommodation.
RW Capital purchased the 1.3 hectare site with a sustainable passing income, below replacement value and at a land value equivalent to 10 years prior (601 Coronation Dr). The investment also provided RW Capital with optionality.
Union Place, Jannali
Botanic, Lane Cove
Union Place and Botanic were apartment projects in strategic locations near town centres, transport links and amenities.
Ray White data showed that the apartments were increasing in value in both locations. RW Capital reacted to the data and were first movers in undertaking apartment developments in the well-located areas.
RW Capital identified an opportunity to transform under-utilised land and air rights in Jannali into 89 apartments and a tavern development. Returns to investors were realised over two stages:
– Stage 1: 65% valuation uplift over 14 months
– Stage 2: 20.7% gross IRR over 5 years
RW Capital capitalised on higher density rezoning in Lane Cove and secured an option over four properties totalling 4,402 sqm for $15 million, or $190,000 per proposed apartment:
– Botanic was 100% sold in six months
– Construction was completed on program and budget
– Marketing included a display suite in the heart of Lane Cove Village