07 3555 6333Commercial resumption achieves 20% increase including loss of business
Brothers “Bob and Egan” had taken over their shed business from their father and had built it into a thriving business. They had done the sensible thing and reinvested the business profits into commercial property. The property that they had chosen was located near the M1 Motorway, which was great for logistics, but was too big for their current requirements. So they did the smart thing and constructed a number of sheds and let them to other businesses. Although this was a significant investment for the brothers, it was earning more than it cost them, so it was a wise strategy that saw them on their way to building their nest egg for the future.
The expansion announcement that was not totally good news for everyone
Anyone that has driven along the M1 between Brisbane and the Gold Coast will have experienced the frustrating delays and bottlenecks that frequently occur from the high levels of traffic using a corridor that was not designed for today’s traffic volumes.
Like most locals, the brothers were pleased that something was being done to expand the motorway, however they knew straight away that they were probably going to lose their property. This is a problem with locating next to a highway or major road; you never know when that road may be expanded, and your property earmarked to enable the expansion.
What about their future business?
After overcoming the shock of losing their profitable investment property, Bob and Egan knew that they had to get the right advice. They had spoken to the Department of Transport (TMR) and were given a figure for the value of the property that they thought was reasonably fair. What hadn’t been factored in was consideration for the loss of their future income, that they were also entitled to.
Once they engaged NPR Law, and their own Valuer, we were able to help them quickly realise that if they accepted TMR’s original offer, they would be seriously short changing themselves.
The long negotiation and property resumption process
As the roadworks weren’t starting for a while, we set to work negotiating the true value of the property and entitlements with TMR.
We were able to obtain agreement to factor in the value of the future businesses that would be lost due to the forced acquisition. This resulted in a new offer which included in an increase of about 20% for the brothers. It also included compensation for the removal of the business, loss of trade and advising their clients and tenants that they needed to move.
Once the negotiations were close to being finalised, it became clear that the property was not going to be required by TMR for a number of years. We resumed consultations with TMR and obtained agreement for the brothers to be able to take a head lease of the entire property, with provision to allow them to sublet to the other tenants. TMR agreed to this arrangement as they didn’t want the headache of managing those tenancies, and also they didn’t want to have to negotiate with the tenants for compensation.
A better investment
Around three years later the brothers found another property which was larger than the one which had been resumed, and purchased it with the compensation that they had received from TMR. They set about building more sheds and letting those to other businesses, including many of the businesses that were on the resumed site - moved at no cost to the tenants.
The good news is that in addition to being able to afford a larger property and look after their tenants, the value of the brothers’ investment has significantly increase over time.
Getting professional help really paid off
The brothers’ decision to seek professional help and not just accept the original offer, even though at the time they thought it was reasonable, was one they are very thankful they made. In the long run, they are far better off and have a much brighter future than they thought possible.