Acting as principal
Our own capital, the same discipline
An Auckland commercial property acquired below valuation, repositioned across three workstreams, and realised through a staged divestment.
Principal investment · Acquisition · Development · Divestment
1.7×
equity multiple on a $600,000 position, as principal rather than advisor
The situation
Klug’s principals acquired and repositioned this asset directly, through a special-purpose vehicle in which Klug’s director held a one-third interest alongside two co-investors. It appears here as principal work rather than a client mandate — the same discipline we bring to advisory engagements, applied with our own capital at risk.
The brief we set ourselves was specific: find an asset where the gap between current and potential performance was wide enough to justify the execution risk, and where active management could produce a return the market had not already priced.
The opportunity
After reviewing opportunities across the Auckland market, we identified a commercial property that met the brief. It was acquired off-market at approximately 9% below independent valuation, with total equity of $600,000 and bank funding peaking at $1.25m, creating immediate equity headroom before the repositioning programme began.
The underperformance had identifiable causes: below-market rents on leases approaching expiry (around $90,000 net per annum with only two years remaining), deferred seismic work that had suppressed buyer interest, and a site layout never adapted to its current use.
All of it was addressable. The fundamentals — location, building quality, site characteristics — were sound.
The approach
Klug led the acquisition, including due diligence, modelling of the repositioning scenario, and negotiation of the purchase price.
Post-acquisition we ran a three-part asset management plan: lease restructuring to reset rents to market and improve tenant quality, a targeted seismic and upgrade programme, and a subdivision to unlock latent value in an underutilised portion of the site.
We re-geared the main lease from $90,000 net per annum on a two-year tail to $110,000 net per annum on a new eight-year initial term — an immediate income uplift of around 22% and a step-change in WALT that improved the capitalisation profile for future buyers.
We invested approximately $350,000 in seismic and improvement works to clear the compliance overhang, and subdivided the balance land to create a separate saleable lot.
The outcome
The strategy was realised through a staged divestment. Following the lease reset and works, the improved portion of the asset transferred to a related entity at $1.5m.
The subdivided balance lot sold to a national grocery operator for $1.7m for development as a new store, taking total proceeds to $3.2m.
Against peak capital employed of $1.85m and capex of $350,000, and on a look-through basis after repaying debt and allowing for transaction and funding costs, the investment returned an equity multiple of approximately 1.7× and an internal rate of return of around 15% per annum over the hold period.
Key takeaway
Returns like this are not accidental. They come from a clear acquisition thesis, disciplined execution across several workstreams at once, and active management throughout the hold.
Finding the right asset — where the gap between current and potential performance is real and addressable — is the first step. Structuring the capital, re-gearing the income and unlocking site-level opportunity is where the return is actually made.
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