6 months on.....
Well, it's been nearly a year since we spotted this shopping centre, and just on six months of owning it. What an experience.....lessons learnt so far ;
Everyone who owes us money does everything in their power to either minimise it or drag it out as long as possible
Everyone who we owe money to demands that the bill be paid in full and straight away
Like residential property but on steroids, all of the Tenants are completely useless and won't lift a finger if they aren't forced to.
The Lease wording is completely irrelevant, as the retail legislation completely runs roughshod over the Lease. Currently the legislation is grossly in favour of the Tenant, and new stuff is coming out to strip away further Landlords rights and hand more rights to the Tenants. Get me outta here !!!
We've been rebuffed twice now by long standing retail Tenants, who have signed the Lease written by a very large shopping centre owner, knowing full well they don't have to comply with any of it as it contravenes the legislation. Tenants are a protected species - unlike in my more familiar Industrial and Commercial.
Four Tenants have just upped and left, gouging a rather large hole in the cashflows.....including ;
3rd biggest Tenant with a Lease out to mid 2020 with Guarantees - gone and the poncy lawyers tell me there is nothing I can do. Started the 15 yr Lease in 2005 and only paid the previous landlord rent once in 4-1/2 years...staggeringly bad business folk.
5th biggest Tenant. Tenancy expired at the end of the year and he just left owing us for 2 months out of 2 months. He now dribbles a tiny amount to us every week. The interest bill on the debt is 3/4 what he dribbles to it.....he'll be paying that 2 months rent bill back to us over about 6 years the rate he is going....nothing we can do to speed it up.
8th biggest Tenant - had a 5 year Lease just started. He just shut the shop and buggered off. Lawyers are now writing him a Letter of Demand and Notice of Default for the 5th time, each one being ignored completely. He's a character (old rough tough Maori grandfather) who I am very used to dealing with out in the industrial blocks.....the type of character who is impervious to lawyer letters. Unlike an industrial situation, in this festering retail environment I am not allowed to speak a language that he understands.
11th biggest Tenant - small short term tenancy, initially established just for the Vendor to say "it's fully leased and ready for sale" expired and he didn't extend. He was charged only 1/3rd the rent level by the previous Landlord to get in there and give potential buyers the appearance it was full, and when approached with a proper rent level, just folded as expected.
Australian cleaners who had "worked" there for 22 years were sacked after just 4 months. They were paid massively, and it took us a while to realise....(OK, we're a bit slow on the uptake) they weren't doing any cleaning, had a huge attitude and were charging about triple what the going rate was. We now have cleaners who actually can drive a mop, aren't afraid to grab a broom and move around with it, who don't swan about thinking they own the joint and are more than happy with payrates less than half of what was being paid (still well above award rates).
Carpark lighting - yowtza - what an electrical head case.....big money being burned up over iddly fiddly little timers and switches. Trying to track down what goes where and what operates / trips / activates what is a nightmare when you haven't been involved with the installation.
Irrigation / bore stuff - Dad and I spent about 3 weeks trying to track down all of the intricacies of the system....once again, inheriting stuff is painful when no-one is there who knows what the system is. Had a hilarious time trying to change out a faulty ball valve which was right next to the big mains valve. Of course, the big mains valve needs a special handle to turn it off, which took $ 115 and 4 hours to track down. Once it was found, we discovered not only the ball valve we were trying to change was leaking, but so was the mains valve !!! Joy !! In his mid 70's, Dad joined me dripping wet as we got blasted trying to change out a valve against the full tide of a 4" line under mains pressure. We both now know what it's like having a hose down in prison like in the old days.
Leasing - hired the best leaisng agents in the hope that the vacant space, once renovated, would be up and running. Cannot flog this dog off until it's fully leased....the main job. Leasing agent, despite no less than 14 emails and 57 phone calls over the past 4 or 5 months hasn't responded. I'm up against the likes of Westfield and Centro's for their attention, and this little squeaky wheel can't be heard against the din of a Westfield / Coles leasing deal over 35,000 sqm of premium space leased out for 30 years with 4 x 10 yr options. Our little patch doesn't even rate a mention.
Builders - have had quotes for both repair and reno's. One guy came in and quoted $ 350 for a small job. I said righto. I then mentioned it was going to be an insurance job and would need an official written quote. He said "Righto, now, it is commercial, so I better double it, and cos it's insurance I'll triple it again." Paperwork quote came in at $ 1,959.00.
Council guy - we have plans in to Council to "re-furb" an area and get rid of a dead mall and convert to usable nett lettable area. Put those in mid Feb. They reckoned 30 day turn around decision. Found out they only have one planner. All others won't work for the money Council offer. Their only planner is treated like a golden goose. Our architect asked him for feedback on day 29. He said he hadn't even opened it up and was about to go on holidays. It's now day 74 and he still hasn't even looked at it, and there ain't nothing we can do about it.
Our strategy for handling the place is still up in the air. With 4 decent shops empty, the place looks bad and like a ghost town in parts....not good. A lot of steps need to be taken to hustle it up - my only job nowadays is to hustle people up.....we'll get there I suppose.
Cashflows are still healthy. Rents received have paid our mortgage, paid all our bills so far, paid decent distributions to all unit-holders every month, and managed to squirrel away enough excess cashflow to pay for the entire re-furb costs.
The plan of course is to get the refurb approved / done / leased and then flog off. We have the option of strata'ing up the shopping centre, with the intent of selling off the minor shops to pay off the debt and keep the supermarket owned outright for a healthy completely passive income of 50K / mnth.
Either that, or sell the lot and use the profits to pay down debts elsewhere in the portfolio and put the whole entire retail nightmare to bed and get back to my old traditional comm and industrial hunting grounds. We are yet to decide.
Anyway, 2 burglaries, 8 graffiti events, 1 slip up, multiple whingy complaints, 7 A/C complaints, 2 smashed doors, 3 smashed ceilings, 1 sexual assault, 3 Tenant runners, multiple cockroach infestations, 6 Tenants behind in payments, sacking my first ever employee, digging out grease traps, handling old syringes, sweating up on a roof in 60 deg midday heat......I reckon there has got to be an easier way of turning a buck. I reckon the CEO's of other organisations don't put up with this ****.
I just gotta get smarter.
including Perth, Adelaide and even Sydney 
