General Commercial Property Queries

Discussion in 'Commercial Property' started by kmrr, 16th Feb, 2022.

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  1. The Y-man

    The Y-man Moderator Staff Member

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    I hope so! I have a lot of $$$ tied up in cbd offices :oops:

    The Y-man
     
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  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Charging commission for doing their contractual obligations?

    Unless you are taking on the management yourself or had a particular relationship with the agency, the new property manager would make these arrangements.
     
  3. jins13

    jins13 Well-Known Member

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    Not making payments when it was due, especially with strata levies and water rates as the strata company and WA Water Corporation both confirmed they were not paid. I believe the strata company and WA Water Corporation over the property manager. It was unsurprising that it got paid after I questioned them about it, so therefore it shows they were dishonest.

    I was extremely displeased with the fact I needed to be on top of their activities and constantly ensure they actioned things in a timely manner (in fact they were always late). I'm not the type that micromanages my property managers as my other property managers do a good job and they give me no reason to question anything but this particular agency I didn't have trust in them because even the monthly statements seemed to have financial discrepancies in them.

    Considering the management fees we were paying, I didn't think they were doing or representing our best interest. An example of this was they were very hesitant to increase the CPI increase as per contract. They stated that WA commercial properties had no rental increases in the last two years and provided some poor comparable examples of vacant commercial properties.

    I expected some resistance from them when I submitted my notice of termination, but because I had quite a number of concrete examples and left them with very little wriggle room, therefore they had to acknowledge the email and agree for a new agency to take over.
     
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  4. Scott No Mates

    Scott No Mates Well-Known Member

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    That's a contractual obligation not subject to market review, I'd agree that it's the right course of action as they have demonstrated that they don't know what they're doing.
     
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  5. jins13

    jins13 Well-Known Member

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    Agreed that they had no idea what they were doing and it's good that I pulled the trigger now before it became a bigger issue. I still can't believe we were only 4 months into the agreement and yet there were so many issues in a short time but I hope this will assist other people.

    I'm still keen to learn as much I can in the commercial space and slowly grow my CIP portfolio to balance it out with my residential.
     
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  6. kmrr

    kmrr Well-Known Member

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    I've got a tiler as my tenants in my dandenong WH signed up to a commercial lease (2021) however the agent is now telling me this should have been a retail lease. it's much more straightforward to deduce what is a retail use of property however can anyone explicitly outline what occupants and uses would classify as commercial?

    judging by what i am reading and re reading, everything should be treated as retail as all tenants provide a good or a service either direct to the consumer or another business.. what am i missing here?
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    The retail leases Act NSW provides a detailed list of categories which are retail uses however it also provides exemptions. In Victoria it's defined as "premises used predominantly for sale or hire of retail goods or services". It even covers business to business users.

    If you used a solicitor to prepare the lease, get their advice as the lease will be overridden by the Act where it contradicts the lease.

    Check out vsbc.vic.gov.au
     
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  8. kmrr

    kmrr Well-Known Member

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    My solicitor at the time said i could get away a commercial lease, and i've pushed the agent to collect my single holding land tax portion successfully. I still think it is pretty unclear who or what businesses shouldn't be on a retail lease though because almost all business is to the final consumer or another business consumer and what isn't considered a retail good or service?
     
  9. Scott No Mates

    Scott No Mates Well-Known Member

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    That Act is clear as mud. I prefer a definition in or a list of categories which forms retail as per the NSW schedule. It leaves no doubt that a mechanical garage is a commercial usage not a retailer.
     
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  10. Cheern

    Cheern Active Member

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    Thanks to all gurus,

    I am a newbie to commercial property after more than 10 years investing in resi. Reading all the posts here to learn as much as possible. A very simple question I have atm is security bond or bank guarantee as part of lease. Coming from resi space, I thought this was also compulsory? however, if one of the leases of a property I am looking to buy specifies no bond nor bank/personal guarantee, what are the risks? is there remedy available before settlement to reduce the risk?
     
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  11. Scott No Mates

    Scott No Mates Well-Known Member

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    Is this a new lease or for an existing tenant?

    On a new lease it's a non-negotiable for me. There are 1,000,001 reasons to have a bond and only 1 for not holding a bond (related party lessee).

    On an existing lease, I would be negotiating for a vendor to provide the equivalent of a reasonable bond as the tenant would have no obligation to provide one. What's reasonable? Depends.
     
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  12. Cheern

    Cheern Active Member

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    thank you. It's an existing lease. Will go back to my lawyer and request that.
     
  13. jins13

    jins13 Well-Known Member

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    It may be difficult to go back to residential investing for returns. Other than the bad property management, overall had minimal issues.
     
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  14. kmrr

    kmrr Well-Known Member

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    not really a query but just a little bit of anecdotal information i got recently. I was speaking with a victorian based commercial developer who works with some funds and what they were saying is that the funds have asked for tenants in existing and new premises be signed up to short leases. they (the developer) were a little taken aback because you would usually want strong tenants with high long WALEs. the reasoning being they (the instos) are seeking to raise rents at review time and raise them significantly.

    this shouldn't be too surprising given we all know rates are rising but it was an interesting insight to hear this is what is happening an an institutional level.

    Personally, I'm sitting out the rest of 2022 and no longer looking to buy. i'm hoping there will be some better deals next year once rates start kicking in and the market begins to cool. hopefully i can find something with a short least that is under let too...
     
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  15. jins13

    jins13 Well-Known Member

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    I was listening to a commercial property podcast which mentioned that tenants may be reluctant to sign for 5 year leases due to the current climate. I have a lease which expires in late 2023 but I think the tenant will take up the option as it's only another two years and the tenant has been in this location for a number of years.

    I have seen some recent multi-tenancies which have leases in place which are month to month or very short leases attached too. It presents an opportunity to extend the current leases but I wonder if the vendor was unsuccessful to get them extended.

    Personally, I am keen to purchase one more this year but it depends on the deal and the equity amount I can release from my residential properties. I should also add it will depend on the significant other because she may veto the move!
     
  16. kmrr

    kmrr Well-Known Member

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    out of interest, what kind of yield/interest spread are you looking for?
     
  17. jins13

    jins13 Well-Known Member

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    In excess of 6% net and with some future opportunities. Unfortunately not a massive player like some of the other people here who can spend the time and money to develop the site.
     
  18. SeanR

    SeanR Well-Known Member

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    Anecdotally as well, yesterday I was speaking to a valuer who does a lot of commercial in our area and has valued a few buildings around here. He mentioned all leases need to have a CPI clause (which we know) plus also he mentioned that even he had noticed rents were starting to rise. And that if you get into a long lease you need to make sure you're not caught out under-leasing the property and stuck.

    Our of interest, can I ask which podcast this was?
     
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  19. Rentvester

    Rentvester Well-Known Member

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    That's exactly what I am looking for at the moment, thanks @Beano you legend!
     
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  20. KeG

    KeG Member

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    Hi, new to commercial investment just recently bought a commercial warehouse 80 %LVR , 5% yield. Ive used the equity of 2 properties for a deposit for this. Now would like to see if how can we move on from here, can we extract the equity from the recently purchased commercial property to use as a deposit for either a commercial or residential property? Thanks guys...