Commercial property yield

Discussion in 'Commercial Property' started by SA-Investor, 26th Jun, 2020.

Join Australia's most dynamic and respected property investment community
  1. SA-Investor

    SA-Investor Active Member

    Joined:
    5th Mar, 2020
    Posts:
    44
    Location:
    Adelaide
    What yield would you expect when valuing a commercial property?

    Specifically one rented to a bank with only a 1+1+1 lease? 1hr from Adelaide.
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,096
    Location:
    Sydney or NSW or Australia
    Yield would be the same as for any other C-grade tenant. There's no pain to be experienced by the bank if they were to vacate 1 day into the new term as they have deep pockets.

    All you are buying is the term certain ie the balance of the current term.
     
    wooster and Beano like this.
  3. SA-Investor

    SA-Investor Active Member

    Joined:
    5th Mar, 2020
    Posts:
    44
    Location:
    Adelaide
    Thanks, and what yield would you put that as?
     
  4. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,437
    Location:
    Melbourne
    15%+ pa net unless the thing was in a ripper location.

    The Y-man
     
    Scott No Mates likes this.
  5. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,096
    Location:
    Sydney or NSW or Australia
    Those days are long gone unless the site is virtually unleaseable.

    A proper analysis would be required to determine what it's worth. ie what is market rent for similar properties, what are indicative sales supporting, will works need to be funded/capital required to relet the property & how long will it take to re-lease the site?
     
    wooster likes this.
  6. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,437
    Location:
    Melbourne
    I use the "hack investor" view :) - if it ain't going to give me 15%+ pa, I might was well buy shares in the bank that is occupying the property (take note OP! People like @Scott No Mates and @Beano know what they're talking about!) ~ actually given today's share pricing, maybe I should revise to 20%+ pa!! :eek:

    The Y-man
     
    Last edited: 27th Jun, 2020
  7. balwoges

    balwoges Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,700
    Location:
    Lake Macquarie
    I see the banks divesting themselves of even more properties over the next couple of years. Reason? I am back to doing the grocery shopping again and have noticed that hardly anyone uses cash these days, even the bread shop discourages cash. The banks sent out cards to their older customers in the early stages of the virus lock down and they are using them, dont think banking will ever be the same again. Use their cards, dont have to visit the bank! this was a brilliant move.

    That's one reason, also think the banks will be doing their best to restore the value of their shares and dividends which means trimming their costs such as their property portfolio. Not forgetting their other problems :rolleyes:

    That's my tuppence worth ... :D
     
    Last edited: 27th Jun, 2020
  8. Cousinit

    Cousinit Well-Known Member

    Joined:
    6th Aug, 2017
    Posts:
    1,022
    Location:
    Victoria
    I've seen a few bank buildings come up for sale, make good prices and then a few short years later the bank finishes up the lease and that's it. No more tenant!

    25 years ago there were 25 people working in my local bank and now there is around 2. I keep reading about cash disappearing altogether from the economy a few short years from now but I find that hard to believe.
     
  9. Beano

    Beano Well-Known Member

    Joined:
    7th Apr, 2016
    Posts:
    3,346
    Location:
    Brisbane
    Fifty years ago every company had a pool of typist.
    Today there are almost none around
     
  10. Cousinit

    Cousinit Well-Known Member

    Joined:
    6th Aug, 2017
    Posts:
    1,022
    Location:
    Victoria
    It's not really all that long ago that typewriters were still used.
    Well, it doesn't seem like long!
     
  11. Mark F

    Mark F Well-Known Member

    Joined:
    29th Jan, 2020
    Posts:
    1,029
    Location:
    Canberra
    You want at least 50% as the bank will be moved on in a couple of years and bank buildings are very expensive to convert to other uses - heavily reinforced safes and strong rooms.

    @Beano and tea ladies.
     
    Cousinit likes this.
  12. Beano

    Beano Well-Known Member

    Joined:
    7th Apr, 2016
    Posts:
    3,346
    Location:
    Brisbane
    I may still have my "imperial 66"
     
    Cousinit likes this.
  13. balwoges

    balwoges Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,700
    Location:
    Lake Macquarie
    Full of credit cards? ... :D
     
  14. Cousinit

    Cousinit Well-Known Member

    Joined:
    6th Aug, 2017
    Posts:
    1,022
    Location:
    Victoria
    Yes they are everywhere in country towns throughout Victoria at least. Many of them are well built buildings but not easily repurposed.
     
  15. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,437
    Location:
    Melbourne
    Holy.... just had visions of bikie clubhouses and meth labs....

    The Y-man
     
    Mark F likes this.
  16. Mark F

    Mark F Well-Known Member

    Joined:
    29th Jan, 2020
    Posts:
    1,029
    Location:
    Canberra
    Yep! An old bank building would be great for meth lab. Really solid construction to keep rival gangs at bay and hidden in plain sight on the main street with no nosey neighbours and possibly just a few metres away from the cop shop.
     
    Cousinit likes this.
  17. Fargo

    Fargo Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,304
    Location:
    Vic
    May as well buy shares in steamtrains as banks. It's a digital world now. Better to buy shares in PPH, EML, APT, BVS, NWL and IRI. Banks are dragging ASX down.
     
  18. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,096
    Location:
    Sydney or NSW or Australia
    About the only saving grace will be the $20k that the bank will pay for the ATM enclosures but you'll be stuck with the best located shopfront in town - near the crossing & other banks. PS: usage of ATMs is down and decreasing due to tap & pay, Eftpos etc.

    I know of several ex-CBA branches in suburban Sydney having lain vacant for a few years.
     
    Cousinit likes this.
  19. SA-Investor

    SA-Investor Active Member

    Joined:
    5th Mar, 2020
    Posts:
    44
    Location:
    Adelaide
    also the uncertainty doesnt actually worry me as future use for my own business is the play (although the uncertainty as to whether that would be 1 2 or 3 yrs is
    i don’t disagree with that at all. In fact I see it as a positive as I have other use intended for the building but want to know what the market rate to push for in a sale may be based on all those negatives.

    ive been told 6-7% reasonable for the area but banks often want to see in the 8s
     
  20. SA-Investor

    SA-Investor Active Member

    Joined:
    5th Mar, 2020
    Posts:
    44
    Location:
    Adelaide
    I had wondered what happens to the atm in such a case. Are you saying they buy them? Or rent them?