Hi Everyone
I'm a long-time reader, first-time poster on the forum. The reason for the post is that my family design and building company has got a postive-cash flow commercial property on the market.
We have developed four factories right next to the Hume Freeway in Wodonga, Our growing company will be occupying two of these factories, however, the two pre-sales we had received have unfortunately now fallen through. Now the bank are crapping themselves and are forcing us to sell at least one of the factories to reduce the outstanding debt.
We've decided to sell one of the factories we are occupying as it should be easier to sell than an unoccupied factory.So if anyone is interested in this investment we have a prestige brand new positive cash-flow, architect designed, 7m high factory/showroom of full concrete tilt-panel construction, 720sqm, with a $60,000 p.a. income over a three-year term. The development is one of the first in a new industrial estate which can be easily seen from the Hume Freeway with an access interchange only a few hundred metres away.
We're looking for a cap-rate of 7%.
As the factory is new there are also high depreciation incentives as well as the fact that the building will be virtually maintenance-free and will be fitted out. The development is due for completion in April 2009.
There's no gimmick to the development, we've structured it as a positive cash-flow deal as we're looking for a quick sale to appease the banks and move on with finishing the development.
If this interests you, we're hoping the offer won't last long, please send me an email at [email protected] for further information.
Kind Regards
Tye Spierings
Tye mate,
I think I know why the other sales fell over. 7% cap rate for a three lease in Wodonga is way off the mark.
Maybe 8.5% – 9%+ would see some interest in your property. There is also the three year 'leaseback' scenario that would concern many buyers. I guess you guys could easily move on and/or build another factory for yourselves at the end of the short lease term.
All commercial properties are cash flow positive at the moment.
How about a 10 year lease with a 6 month bank guarantee at 9% + GST + outs. I may be able to do something with that.
Chris White | Pillar Property
http://www.pillarproperty.com.au/
Email Me | Phone MeThe Property Investment Specialists
Chris White wrote:All commercial properties are cash flow positive at the moment.
How about a 10 year lease with a 6 month bank guarantee at 9% + GST + outs. I may be able to do something with that.
Whilst you're banging it on thick, how about a strong covenant as well, maybe a national distributor or a publicly listed entity…..
Tye,
it is easy to achieve 7% on Sydney industrial at the moment, I'm with Chris on the cap rate being much higher. An article that I read was pointing toward returning to 1990's yields – we're in for a lot more pain yet (for comm/ind/retail), this will equate to at least a 25-30% price reductions.
Extending on a discussion today, the handouts given away by developers by way of fitout contributions (super easy credit) has only contributed massively to wildly overpriced assets as valuers (property owners and investors) have not been viewing effective rents but the grossly inflated rents required to recoup the contributions which have been given away (and hidden in 'side agreements'). It is only now that the developers do not have the cornucopia of funds for the fitout contributions that rents will commence to fall and that yields will be more reflective of effective rents as there are few contributions to be flushed out.
Westfield and GPT yield more than 10%
7% is ridiculously low… plenty of offers around sydney ~9-10% depending on grade of commercial property
Thanks for the feedback guys.
Chris the initial sales were from owner occupiers, not investors so it was probably structured a bit different to what you have assumed. But we understand the cap rate is low, particularly when comparing with Sydney and Melbourne properties. However, we (in the sticks) did not experience the huge capital increase in commercial the capital cities did and have already had quite a drop in Comm prices from their peak.
On a more personal note, we're not overly concerned about the sale as most who have come back to us are looking for the 8%+ return, however, we're happy to sit and watch the interest rate movement in the coming months and hang out for the 7%-7.5% return as our companies can cover the interest in any case.
I guess there is always a risk when having a building company as a tenant, however, we're quite a diversified company with separate design, building, window fabrication, steel and joinery "entities", so we're looking at the development as our hub in occupying 50%-75%, instead of being spread throughout the town. The aim was always to own at least two. The fourth factory is already under lease.
I.P. I'm very glad you can…
with regards to the handouts, in your experience (and from the discussion) is that also the case in regional areas. The reason I ask, annecdotally speaking, we and other large towns in the area, have a much higher owner-occupied commercial sector than the capital cities, I'm not sure if that is the case for Ballarat, Bendigo etc, (maybe someone will be able to help) as the fitout contribution "issue" hasn't been as apparent to us or any of the local agents I've spoken to since your post. Any further info would helpRegards
Tye
Always better if you are not a 'motivated seller'.
Good for you on being able to hold.
Best wishes
Chris White | Pillar Property
http://www.pillarproperty.com.au/
Email Me | Phone MeThe Property Investment Specialists
Tye,
I mostly deal in the capitals & major east coast regionals where incentives were rife. However, going back a few years I was able to negotiate substantial non-cash benefits eg 1 yr rent free, construction to Lessee's plans & more in rural Qld.
I know Albury reasonably well, I pass thru at least 2 – 3 times per year. Even though it is a regional, I would still be expecting about 10% yield.
Tye,
Have you sold your properties yet?Wouldn't expect any takers at 7% unless it was an undertaker tenant on a 99 year lease.
That low rate applies to a national brand tenant on a long lease with strong
reasons to stay, rather than a factory builder with nearby spare vacant factories and a pressing LVR bank issue.
Perhaps you could look for a local who needs to expand.
Good luck
Cheers
thecrestthecrest | Tony Neale - Statewide Motel Brokers
http://www.statewidemotelbrokers.com.au
Email Me | Phone Meselling motels in NSW
Thanks Crest
We've got the other factory tenanted now, so the bank have softened their stance, different manager made a difference too. Was just seeing if I could spark some interest from a different form of advertising.Cheers
Tye
with regards to the handouts, in your experience (and from the discussion) is that also the case in regional areas. The reason I ask, annecdotally speaking, we and other large towns in the area, have a much higher owner-occupied commercial sector than the capital cities, I'm not sure if that is the case for Ballarat, Bendigo etc, (maybe someone will be able to help) as the fitout contribution "issue" hasn't been as apparent to us or any of the local agents I've spoken to since your post. Any further info would help
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