Commercial landlords and shopping centre owners have seemingly been oblivious to the fact that we had a Global Financial Crisis and have continued to demand high rentals while the economy headed very much in the opposite direction.

The plight of struggling small businesses, especially those in popular shopping precincts, was clear as "For Lease" signs started popping up on shopfronts across Queensland.

However, some leasing business owners are starting to take a stand and rent negotiation is becoming more common and more successful!

Mark McInnes, CEO of the Premier Retail Group owning such major retail chains as Just Jeans, Jay Jay's, Dotti, Portmans, Peter Alexander, Jacquie-e and Smiggle, took a firm stand against ridiculous rental prices at the company's recent AGM.  This stance proved successful with their Portmans store in Canberra, where they achieved a rent reduction of 30% after threatening to simply shut the store and go online.

Promisingly, it is not just the retail giants with these powers of persuasion.  Other success stories include Broadbeach restaurants Sage and 1Two3 who negotiated a respective 45% and 32% reduction in rent.

Closer to home, Fortitude Valley was hit hard by the economic crisis and the reign of relentless landlords and is only now starting to experience some relief.  Lydia Zimnoch Woolcott, owner of the fashion boutique Drobe in the popular Ann St stretch, has negotiated a small reduction in her rent but comments:

"As much as there has been a little help and rent reductions here in Fortitude Valley, it is still far less than the 30% reductions seen in other areas.   There is still a long way to go to assist business owners in this area to be able to survive through this difficult economic time where retail sales are significantly lower than they need to be to stay afloat."

George Hadgelias, Principal of Ray White Paddington, comments further on commercial leasing in Brisbane:

"What we're finding is in good quality, high profile, high street locations that the rents being paid are at least the equivalent of, or in excess of, rents achieved pre the GFC. What we have found is to maintain the rents and obviously protect their investment, lessors are prepared to offer bigger incentives by way of contributions toward fit out and extended rent free or half rent periods."

The key message here for renters is to negotiate â€" ensure that your rental commitment is both commercial and realistic for your business.  Next to the payroll, rental is often the largest overhead for a business and requires management and control. 

We recently received the following email from our property manager which advised of the damage caused by a simple water leak and outlined how this incident might have been simply and inexpensively avoided.

. . .  A tenant's hot water system burst and a significant water leak followed – causing damage not only throughout their tenancy but to common property (lifts, lights, walls, ceilings and fire panel) and to all the tenants below; this was exacerbated by happening over the weekend when no one was in the premises. Current estimates of the damage are in excess of $50,000 – excluding loss to trade and inconvenience.

If taps supplying water to appliances/equipment are not turned off when not in use, the hoses connecting your water supply will remain under constant water pressure. This constant water pressure can cause hoses to burst or slip off your tap. A burst hose can loose 10,000 litres of water in just 6 hours.

In this case the tenant's hot water system was not maintained and did not have a water shut-off valve installed. The tenant is responsible for all damages resulting from equipment or fitout within the premises or belonging to them. Had a shut-off valve been installed water would not have been fed constantly for hours/days, damage would have been minor and contained.

The purpose of this memo is to bring to your attention the importance of ensuring your premises have shut-off valves installed – and not only to hot water systems but also dishwashers, fridges, fresh water filters, washing machines and any other appliances that may be connected to your plumbing.

Water-stop valves are relatively inexpensive and can be fitted by your plumber. If you have not already done so, we strongly encourage you to do so without delay. You can organise this yourself or we can put you in contact with the building plumber to carry out this simple task on your behalf. The following links highlight the simplicity of Water-stop valves:

We echo the warning – if you are not sure that you have water stop valves, contact your plumber and have them installed as soon as possible. Insurances may well cover the losses – but best to avoid the potential that they will not.

Our commitment to the community

In keeping with our commitment to the community, Overells has recently donated to Cystic Fibrosis Queensland (CFQ) - a charity much underfunded by the government and, accordingly, in desperate need of assistance.  Currently CFQ receive only 46c per client per day from the government - what is really needed is at least $3.74 per client per day!

Founded in 1960 by concerned parents of children with cystic fibrosis, CFQ's mission is "to provide the education, support and services that empower people in the cystic fibrosis community to realise their full potential."

Cystic fibrosis is a genetic disease that is screened and detected at birth.  It causes thick mucous secretions, predominantly in the lung and pancreas, which lead to chronic lung infections and digestive and absorption difficulties. It is a lifelong condition with no cure but modern treatments such as physiotherapy, antibiotics and digestive enzymes have increased the life expectancy and quality of life of sufferers.

Some facts about cystic fibrosis include:

  • Over 3000 Australians have it
  • More than 1 million Australians carry the gene
  • A baby is born every 4 days with it
  • 80% of parents were unaware they were carriers of the disease
  • Average life expectancy is 37 years
  • There is no cure

It was not hard for Overells staff to choose where this month's donation would go.  Cystic Fibrosis Queensland was a clear winner!

Although not one that appears on the balance sheet, good health is your most important asset! We are all fortunate enough here to have it in abundance and are excited to make a contribution to those who don't.

Self-Assessments COULD be doing more harm than good

When performance evaluation time comes around, managers more often than not ask employees to write a self-evaluation critiquing how they think they are doing. However, according to a recent article in "The Australian Financial Review", written by Dick Grote, although this may seem like a good idea, it may not always be the case.

Theoretically, getting an employee to give a self-rating on their performance gives managers extra information to use in their evaluations and also gives employees a preview of what they should expect from their review. This method can actually "create a false impression of what performance appraisal is". A performance review can be defined as a meeting where a manager provides their opinion on the quality of an employee's work. This review meeting "is a discussion, not a negotiation" and this is where self-appraisals can encourage misunderstandings.

Dick's research for his book "How to be Good at performance Appraisals", proved that individuals are "notoriously inaccurate" when it comes to assessing their own performance and that "the poorer the performer, the higher (and more inaccurate) the self-appraisal".   Incompetent employees are blind when it comes to assessing the distinction between a good and a bad performance. During Dick's studies, a senior executive described to him his company's practice of using a forced-ranking system to identify the A, B and C performers. This executive said, "The A's are afraid they'll be considered B's, the B's are scared they'll be seen as C's, and all the C's are convinced that they're A players."

Managers are the most accurate assessors as they provide a generally unbiased evaluation of the job their employees are doing, the positives and the negatives, which can be something the employees don't do themselves.

If it is company policy to conduct self-appraisals, there is a better way to go about it. First of all, the manager can explain the main purpose of these self-evaluations is a way to gauge how the employee is performing from their own point of view and that it will be only one of the data sources used to prepare their actual performance evaluation. Secondly, you should ask employees to fill these appraisals out well in advance of the actual review meeting, so it can be used by the manager to prepare for it.

A misleading newspaper headline? Surely not!

I read in the Financial Review a page one headline to the effect "trusts are under attack from ATO".

We normally get our tax news from a variety of subscriptions rather than the Fin Review, so I read on with interest thinking we had missed something.  After all, there has been plenty of action on attacking trusts in the last year or two, so another one should not be a surprise.

The thrust of the article was that capital gains made in trusts may not attract the 50% discount that normally applies if the investment has been held for more than 12 months.  Surprised and a bit alarmed, I went to the ATO Ruling that was referred to, only to discover that there were no new principles espoused at all.  In essence, the Ruling was saying that if eg shares had been acquired for profit making by resale, then the 50% discount would not apply.  Now this is  a well known principle and applies regardless of the owner of the investment.

Conclusion?  Don't get your tax advice from newspaper headlines.  Surprise, surprise - they may be there to create a story, rather than impart genuine information!

Tech highlight - Praemium

For the past two years we have been using Praemium, a portfolio admin service, which allows us to efficiently and accurately process a client's portfolio for year end tax purposes.

Key advantages include:

  • fully automated corporate actions to handle situations such as demergers and consolidations
  • automatic broker feeds and upload function to record buys and sells efficiently
If you have a portfolio which consists mainly of term deposits, listed shares or other equity investments, then Praemium portfolio reports may well assist with your investment performance reporting and management.

Praemium has another online feature, V Wrap Investor, which allows access to reports and graphs of:

  • daily trade info
  • portfolio performance
  • performance for any listed security
  • estimated dividends/distributions
  • market activity showing top twenty upward moving securities
  • broker trades analysis by security

If you have a portfolio already set up with us, it is free to access once we have given you a log in.  Watchlists and alerts can also be set up.

So please feel free to contact us if this interests you.

3 Core Measurements for Success

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