The Forza Cheltenham Opportunity Fund was an unlisted commercial property fund that acquired a vacant commercial office building of 4,907m² and 205 car parks on a land holding of 14,605m² (1.46ha) during the GFC.
At the time of acquisition leasing risk was considerable in suburban office markets such as Cheltenham. This transaction was attractive given Forza Capital was able to entirely mitigate this risk at the time of acquisition by securing a pre-commitment for a 10-year lease from iSelect Ltd prior to proceeding with the asset purchase.
The Fund generated an arbitrage profit by pairing a vacant building purchase with a pre-lease.
The Fund undertook a substantial fit out for the tenant and once occupied the investment provided a cash yield of nearly 12%. In addition, there was further value adding potential with scope to develop additional space for the tenant on surplus land retained on part of the site.
The asset was sold shortly after iSelect listed on the ASX and a substantial gain was made for investors, which was tax effective given how the fit out contribution was treated.
