澳洲Australia property Selling commercial property | Sydney


在澳大利亚


We have had a property on the market now for nearly 12 months
and not one enquiry. We wonder what rate of return are investors looking for in this economic climate.

Property listed here

Our property was bank valued at 2.5m 3 years ago. Bank valuations are normally around 10% lower than market prices here in SA.
The current rate of return is around 7.4% based on our asking price around 2.6m

The property is in the Barossa Valley a regional area 1 hour from adelaide cbd. The building is only 5 years old, and has a stable multi-national/international company as a tennant with 5+5 lease and rent is currently 192k net.

The reason for the sale is, after a 4 way business partnership for nearly 20 years, we have decided to go our separate ways as we all have different business interests now.

We are thinking do we change to a national agent for better exposure, to get some interest from investors.

If anyone has any ideas on how to attract potential investors it would be most welcome.

This is now a growth area with a population growth in the area north of Adelaide expected to be 105,000+ in the next 10 years. For someone it would be great investment for the future.  

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D36,
It may be a possibility that your cap rate of 7.4% on a little off the mark. You might want to speak to a valuer who is familiar with the area and ask him what an appropriate cap rate would be. To most prospective buyers, your price may probably seem a little high, that combined with the fact that it is in a regional area could be the culprit.

You mention that the Lease is a 5 + 5, however we do not have any details on the terms of the Lease. It could be that there is no room for significant upward movement of rent due to unsavory rent review terms etc...

I suspect that a combination of procuring the services of a national commercial agent (Knight Frank, Jones Lang LaSalle, Colliers etc) together with the correct asking price would see the place sold.
Good luck.

Boods  

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Boods,

The lease, is a full commercial lease, with a cpi increase of 3% every 12 months, with a rent review at the lease rollover date.
I'm thinking we would need to drop the price to around 2.45 to get any interest, that would bring the rate closer to an 8% return.

Thanks for for your comments, it's appreciated.

D36  

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D36 said: ↑
Boods,

The lease, is a full commercial lease, with a cpi increase of 3% every 12 months, with a rent review at the lease rollover date.
I'm thinking we would need to drop the price to around 2.45 to get any interest, that would bring the rate closer to an 8% return.

Thanks for for your comments, it's appreciated.

D36Click to expand...
You're welcome:)

Are the increases CPI or fixed 3%..both different...I'm guessing that they are 3%, or a combination of both, otherwise that figure would not have been quoted.
Cap rates for some commercial have been as high as 9.5% over here of late (Perth) depending on various factors...they are starting to soften slightly at the moment though.  

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When is the lease rollover date?

When did the first/current 5 year period that the tenant is currently on commence?

What is the current Market rental on the property .. I am not asking what the tenant is actually paying?

What is the vacancy rate like for Industrial properties in the area?

What feedback are you getting from your agent?

A valuation 3 years ago usually bears NO resemblance to the current market

cheers

RightValue  

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The passing rent equates to about $110psm which seems high to me. Plus looking at the photos it appears to be low clearance production style accommodation - is there a tight make good clause in the lease.

If you assume the passing rent is at market, and there is circa 5 years left on the current lease, I think investors would be looking at closer to 10% for something like this.

A national agent would be very helpful too.

Cheers and good luck with it.  

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D36 said: ↑
We wonder what rate of return are investors looking for in this economic climate.Click to expand...

Investors are picking up solid properties for between 9.0 and 9.5% nett yield in Syd / Melb / Adl CBDs.


Yours isn't quite in the same prime locale, so I imagine to attract anyone you'll need to offer a tad higher than that.


If it yields 192K nett, then a maximum asking price of 1.9M in this market would be it. Given current LVR's at 65% for prime assets, and probably only 50% for your property, some poor sod out there in buyer land will need to stump up 950K plus costs.....say 1.1M all up before they even get to first base with the Bank's credit squirrels.


May I suggest that this credit hurdle is far more onerous for you as a seller right now than locating a salivating buyer.


You are currently asking 700K too much.....but I guess you don't want to hear that, and hence my post has not been "helpful" to your plight.  

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I would consider TPFKAD's input very seriously. I agree that the yield is far too low given the location. His suggestion of a max $1.9M price doesn't sound inconsistent with a $2.4M val 3 years ago; many have experienced larger drops than that. :eek:  

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hi TPFKAD
take sydney and bris out of that 9% and put it at 10 to 10.5% at the moment and going higher.
shopping centres are at 9.5% to 10 but blue chip or a grade
anyone trying to sell at 7% net returns are with the fairies at the moment
vacant space is dropped by about 20% in syd and bris and leased has come back if this helps  

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Rather than rely on a bank valuation, you should commission your own. That way you're not guessing.

If your tenant has a 5x 5 and the building is only 5 years old, when are they due to give notice of their intention to renew.

My thinking is a prospective purchaser wants some certainty of income, so the property might be more saleable after the tenant exercises its option. What are you going to do if your tenant says they like the building but they want to renegotiate the rent for the next 5 years? Is there something specific about the building your tenant cannot find elsewhere?

I think Dazz and grossreal are right. The building is over priced. A better estimate of value might be what it would cost to rebuild.  

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I wish to thank all that have posted here, and I have taken notes, and respect everyones input.

It seems if the market for the place is around 1.9m, we are better off not selling, for a while, as the building with all the office fittings cost 1.65 to build alone. The banks original valuation was contracted to an independant valuer specialising in commercial properties.

The cost to build this type of industrial/office now is 1.9-2.0m this is from what the original builder has said as the materials used for this building have increased so much. The land value alone is now over 700k, as land in the centre of the barossa valley is now really hard to get for light industrial.

Thanks again for all the postings.  

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if the land and builidngs are so expensive and the land is rare I would say it must be under-leased

else something does not add up  

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