Bunnings/Mitre 10

So net yield on purchase needs to up in the 6.5% to 7% region ?

 

A higher yield should be justified. This one isn't an emotional purchase so squeezing the yield shouldn't be an issue as the players at this end of the market should be quite knowledgeable in this type of asset purchase.

A few more links to articles:
NZ Herald
For lease

 

Is there a ratchet clause for the review at year 10? This may offer a little comfort that rent will at least remain the same.
Of course this doesn't protect against tenant business failure or bankruptcies. A bond no matter how long can only go so far. Rent reductions will be necessary to attract a new tenant if that occurs.

 

And a sufficient cash buffer for any site decontamination... not a huge concern with a hardware store but with other industries

 

Most recent Bunnings sales results (AFR 5/4/17)

 

@Beano, Whats the latest on the property?

 

Going through the data now
It is more than a mitre 10 box ...it is a major retail park
Approx $25m
Income $1.25m

I am thinking is having 25pc of my income with one tenant too risky?

 

Have to weigh it up against the risk mitigation: amount of bond, how long will it cover vacancy, alternative uses, subdivision, exit strategy.

 

yeah. Echoing @Scott No Mates - it will come down to your personal risk profile mate. would you be ok if that did fall through? I'd curious to know what the bank thinks of this deal too. Have they given you much feedback at this stage?

 

Banks need 30pc to 40pc depending on the net yield .
Interest rate is 4.3pc

 

It is a unusual ratchet
More like a window
So 2pc built in increase pa max 10pc increase on the 10th year but rental can fall up to 10pc so effectively 20pc window