High profile premier invests in Gladstone industrial facility

HE WAS the premier who was trying to sell assets and now Campbell Newman is snapping them up, including a $6.91 million property in Gladstone.

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 $6.91million industrial building in Gladstone.

The former premier heads group that's backing Gladstone to bounce back with investment in multi-million dollar property.

After losing the 2015 election, Mr Newman started Arcana Capital, a property investment company with Dominic Condon.

Former Queensland premier Campbell Newman. . Picture: Ben Turnbull

The company has been quick to start buying, owning four multi-million dollar shops and industrial warehouses.

The group is actively chasing a $6.91million industrial building in Gladstone.

The RCR Tomlinson heavy engineering facility is projected to bring in an 11% yield next year.

Mr Newman's business partner Dominic Condon said they had the Gladstone property "under contract at the moment".

"Gladstone has gone through a tough time but we believe it has a lot to offer as a resource base," he said.

Mr Newman has been tempted by Mackay's property prices too, which are sitting at the bottom of the market and big Australian power house companies paying the rent.

In August, Mr Newman headed the acquisition of 91 Connors Rd in Paget, starting Arcana Capital's first foray into the Mackay property market.

And his partner, Mr Condon said they want more.

Former Queensland premier Campbell Newman. . Picture: Ben Turnbull

"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, $10.616 million after all the acquisition costs, with an interest rate of 4.06%.

But one draw card for Arcana was the quality of tenants in Mackay compared to other areas, with its rent paid by ASX 200 company UGL.

And it's not cheap rent, 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 Newman's business partner 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."

And UGL has the lease for that property until 2024 and a five-year option to extend. It is leased by UGL, an ASX listed company with a share price of $3.150, until May 2024

Its share price spiked from $2.140 on October 10 after news construction giant CIMIC had launched a $524million takeover of the company.

And Mr Condon believes it has the reliability to pay its rent for a long time which is expected to increase from $868,599 to $977,615 in 2019 and $1,100,315 in 2023.

"These companies have gone through some tough times up there and they are still going strong," Mr Condon said.

The UGL building was Arcana's third acquisition as it takes advantages of high yields in the regions.