Marketing Plan: Property Portfolio Ownership and Management

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[. . .] Warrington -- Enterprise Park - Industrial

Value as of 2004 1,485,000

Value as of 2009 1,250,000 loss 235,000 (15.8%)

Highest Value 1,725,000

Total Net Income 807,056 50.18% 10.03% per year

Total Return 37.04% 7.40% per year

This industrial property provided the second highest total net income in the portfolio averaging just over 10% per year. The overall capitalization of the property is only about 5% of the entire portfolio, thereby lowering the risk of ownership by a huge margin, especially when considering the high total net income generated by the property. Another factor to consider regarding this property is that it is industrial in nature, the only property with that characteristic. It might well be worth purchasing an additional similar property to this one if such a location can be found in Warrington; this is especially true since the current market price is at its lowest point in over five years.

Historically speaking this property has held its value very well except during the last year, even through the recent recession. This property is also relatively inexpensive and its type (industrial) is also a small portion of the total real estate portfolio held by the fund.

Liverpool -- Tropicana - Retail

Value as of 2004 4,000,000

Value as of 2009 3,250,000 loss 750,000 (18.7%)

Highest Value 4,950,000

Total Net Income 972,564 22.57% 4.51% per year

Total Return 6.01% 1.20% per year

This property is the most underperforming property in the portfolio; both in income and total return. Its income for the last five years has averaged under 5% and the total return barely reaches six percent for the entire five years, that's only 1.20% per year. The property has also lost almost 18.7% in value over the last five years, and the property encompasses almost 15% of the entire portfolio. If there were any property in the portfolio that would evidence a sale, this property would be it. Considering the fact that the cash garnered from the sale (even at 3,250,000) could be used to purchase two industrial properties in Warrington (if they can be found) it would make a lot of sense to pull the trigger on a sale. A loss on this property could also have some positive tax implications and rid the portfolio of a poor performing investment.

Liverpool -- City Central - Office

Value as of 2004 1,310,000

Value as of 2009 1,250,000 loss 60,000 (5%)

Highest Value 1,475,000

Total Net Income 1,055,531 76.32% 15.26% per year

Total Return 70.81% 14.16% per year

This property comes with the reminder that the fund is seeking properties that provide high income with medium risk, and therefore (unlike the other Liverpool property) this property is one that should be considered a core investment for the portfolio. This property has averaged over 15% net income per year, although the 2009 was much closer to 14% than its high of 17% in 2006. Another strong consideration for this particular property is that the total income generated is 1,055,531 versus the value of the property (2009) at 1,250,000; at approximately 84.5% of value the income generated is the highest percentage of all the properties in the portfolio. An additional strength for this property is the fact that it currently comprises less than 7% of the entire portfolio. Keeping this property would also maintain a fund presence in Liverpool if the first Liverpool property is disposed of. This geographical diversity is important in that geographical considerations also have an effect on the entire portfolio.

The Future

The future seems to be brightening in the real estate investment arena. One recent report concludes that "the proportion of commercial property which is rented is growing" (Property Data, 2010, p. 6). The same report declared that many corporate owners of commercial property have long shied from the heavy financial investment and management involved in owner-occupation. If that is true, then it would seem that the rental marketplace will continue to be strong during the foreseeable future.

Considering the six properties in the portfolio, the fund has averaged an impressive 9.6% total return during the last five years, that is a per year percentage of over 10% income during what many experts would say was the worst recession in 70 years. The fund's focus is on income and that has been evident during those years.

During the next several years the fund will continue to focus on investment opportunities that offers a high rate of net income return. The properties now owned by the fund offer the investor(s) a diverse portfolio with medium risk while creating and maintaining an above average income net return. There are two properties that comprise over 50% of the portfolio value and disposing of one of those (Liverpool -- Retail) might be a good call, especially if tax benefits and reinvestment opportunities present themselves. The five remaining properties are all considered medium risk investments with the potential of some capital gains and upward market evaluations along with a steady and higher than average income.

Since the future also will continue to see a lot of consolidation between business' and government entities under current circumstances, the fund should also be prepared to investigate newer, refurbished and more flexible types of buildings that offer more to the renter. With a huge amount of belt tightening being attempted by governmental entities, these types of spaces will be in relatively high command and will engender a much high rate of income from these entities. More efficient and 'green' buildings will also be the rage for the next several years, so consideration towards those types of buildings could be beneficial to the fund.

Conclusion

The portfolio overall seems to be relatively stable and producing above average income with the exception of two not so stable investments; the Liverpool Tropicana and the Manchester Style Mall. Both of these properties are retail and therefore considered much more volatile In nature. One recommendation would be to rid the portfolio of the Liverpool Tropicana.

Reinvesting those funds in properties that are industrial in nature would smooth the risk curve, and allow for a more diverse portfolio overall. The property in Manchester, although not producing as much in capital growth, still offers a high net income return and therefore should be held. The… [END OF PREVIEW]

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Property Portfolio Ownership and Management.  (2011, January 8).  Retrieved June 17, 2019, from https://www.essaytown.com/subjects/paper/property-portfolio-ownership-management/8158878

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"Property Portfolio Ownership and Management."  Essaytown.com.  January 8, 2011.  Accessed June 17, 2019.
https://www.essaytown.com/subjects/paper/property-portfolio-ownership-management/8158878.