Assets offer super benefits

PRIVATE investors have taken advantage of lower interest rates by snapping up smaller assets through spirited auctions before the end of the financial year.

PRIVATE investors have taken advantage of lower interest rates by snapping up smaller assets through spirited auctions before the end of the financial year.

While some of the properties will be placed into self-managed superannuation funds (SMSFs) to generate rental income, others will be redeveloped and possibly on-sold.

One of the biggest deals in the sub-$20 million market was the site at 70-72 Commonwealth Street, Surry Hills, which sold for $11.3 million to a private Asian consortium.

It was set apart because it sold for more than double its reserve in what the selling agent, the director, sales and investment at Jones Lang LaSalle, Anthony Bray, called a "spirited" auction.

"Thursday's result was a reflection of the high demand for blue-chip assets in the tightly held city-fringe market," he said.

"Bidding at the auction started at $4.5 million and finished at $11.3 million, which gives an indication of the level of competition between the buyers."

The 862-square-metre property is freestanding, which gives the new owners development options. The site, which includes a red-brick, two-storey building, is opposite Longrain Restaurant & Bar, with direct exposure to Harmony Park.

It was owned and occupied by TransGrid, which will remain at the premises under a 12-month leaseback arrangement that includes a 12-month option.

Similar deals are predicted in coming months as private investors look at commercial real estate as an appealing asset class for their superannuation funds.

The executive director, global research and consulting, at CBRE, Kevin Stanley, said there was a significant increase in the number of private investors viewing commercial real estate as an asset class worthy of investment.

"The share of domestic managed funds in cash and deposits remains very high by historical standards," Mr Stanley said.

"This has been driven by uncertainty and caution in other areas of the investment market.

"At the same time, there's been a significant increase in people choosing to be in control of their own superannuation destiny by establishing self-managed superannuation funds."

He said the cashed-up investors viewed commercial real estate as an attractive opportunity, as it had longer leases than residential assets and required less maintenance.

Statistics from the Australian Taxation Office show a big jump in the number of workers shifting to SMSFs. Between 2007 and 2011, the number of self-managed superannuation funds grew by 31 per cent.

"Commercial real estate is a compelling option for investors, with net income yields starting from 7.5 per cent to 8 per cent there aren't many other investment options which can match that at present and provide the [same] degree of control over the asset," Mr Stanley said.

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