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Bank Valuation of Commercial Property

Discussion in 'Property Finance' started by Dwib, 30th Jun, 2015.

  1. Dwib

    Dwib New Member

    Joined:
    29th Jun, 2015
    Posts:
    1
    Location:
    Brisbane
    Hi All,

    Was wondering how a bank would go about valuing a commercial property with the following financials.

    3000m2 commercial property
    2 tenants paying $230,000 pa in total.
    Both tenants on lease terms of 10yrs + 5yrs + 5yrs with 3% annual increase.

    What cap rate would they apply to something like this?

    My thinking was 7% and as a a guesstimate the valuation would be $3.29M. Realise that there other contributing factors but would that be a good starting place?

    Would appreciate others views and expertise on this.

    Kind regards
    Dwib
     
  2. Dazedmw

    Dazedmw Well-Known Member

    Joined:
    7th Jul, 2015
    Posts:
    58
    Location:
    Melbourne
    Are these office/warehouses? I assume so if the building is 3000 square metres with a rental of $230k.

    First step would be to assess if the current rental is at market. Likely to be if they were struck recently?

    Then assess a cap rate. What is the WALE? How old is the property? What is the land size? I don't know about the Brisbane market but in Melbourne you would probably be looking mid to low 7s if the WALE was close to ten years to go tenants. Up towards 8% with shorter term certain.