Former Qld premier buys $10m property in Mackay and wants more
HE WAS the premier who lost his spot in parliament for trying to sell assets and now Campbell Newman is snapping them up, including a $9.7million Paget property.
Mr Newman has been tempted by Mackay's property prices sitting at the bottom of the market and the big Australian powerhouse companies paying the rent.
His first venture in Mackay has secured a property with a large return and an engineering company locked in as a tenant for at least another eight years.
This recipe has him and his company looking to buy more land within the 4740 postcode.
After losing the 2015 election, Mr Newman started Arcana Capital, a property investment company, with Dominic Condon.
The company has been quick to start buying, soon owning four multi-million dollar shops and industrial warehouses.
In August, Mr Newman headed the acquisition of 91 Connors Rd in Paget, making Arcana Capital's first foray into the Mackay property market.
His business partner, Mr Condon, said they want more.
"We like the area and wouldn't mind getting one or two," he said.
"We are waiting on getting the right asset because we can't afford to be over-paying for it. But I am very happy with that purchase."
The risk for property investors like Arcana Capital is that their tenants go broke, making their long-term leases redundant and leaving the warehouses empty for months.
If that happened to Arcana in Mackay it would be costly, with the bank owning 60% of the $9.7million property -$10.616million after all the acquisition costs - with an interest rate of 4.06%.
But one drawcard for Arcana was the quality of tenants in Mackay compared to other areas. The Paget property's rent is paid by ASX 200 company UGL. And UGL has the lease for that property until 2024 and a five-year option to extend.
It's not cheap. Arcana Capital take $868,599 a year in rent from UGL, a yield of 9.22% on the investment.
This means Arcana makes 9.22% of its initial investment back each year, a solid return according to Mr Condon.
"There is a lot of money being spent in Sydney and Melbourne where the yields are from 5-7%," he said.
"But then you can buy an asset with UGL as tenants in Mackay with a passing yield of 9.22%.
"The story is starting to get out down there that 'why should I be buying in Sydney and Melbourne compared to regional Queensland'."
The UGL building was the third acquisition by Arcana as it takes advantage of high yields in regional Queensland.
The first was a retail centre in Townsville. Arcana paid $5.585million to acquire it and receives a 14.25% yield.
The second was an industrial facility, also in Townsville, purchased for $3.7million and with a yield of 9.33%.
The group is also actively chasing a $6.91million industrial building in Gladstone. The RCR Tomlinson heavy engineering facility is projected to bring in a 11% yield next year.
"We have that one under contract in Gladstone at the moment," Mr Condon said.
"Gladstone has gone through a tough time but we believe it has a lot to offer as a resource base."