Was this a good buy Commercial Property sold at Auction?

Discussion in 'Commercial Property' started by eternit, 26th Oct, 2019.

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  1. eternit

    eternit Member

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    28th Jun, 2015
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    Location:
    Canberra
    This property sold today for $870K 232-236 Crawford Street, Queanbeyan, NSW, 2620 - Commercial Property For Sale

    Lease information:

    Florist Shop

    Lease Commenced 01/04/2018 - expires 31/03/2020

    Option Period: 2 years

    Rent $20,400 p/a GST inclusive ($1,700.00 pcm incl. GST)

    Review: CPI Applies


    Dress Shop

    Leased Commenced 01/04/2018 – expires 31/03/2020

    Option Period: 2 years

    Rent $19,200 p/a included GST ($1,600.00 pcm incl. GST)

    Review: CPI Applies


    Canton Chinese Restaurant

    Leased Commenced 01/04/2018 – expires 31/03/2020

    Option Period: 2 years

    Rent: $29,400 p/a includes GST ($2,450.00 pcm incl. GST)

    Review CPI Applies


    3-bedroom unit upstairs

    Currently tenanted lease commenced 01/08/2019 -expires 31/01/2020

    $320.00 pw (GST free)

    Equates to $16,640 p/a.


    First floor commercial Suite



    First floor, access from Crawford Street and rear access.

    Expected rental $18,200 p/a (incl. GST) subject to market conditions



    Gross Income (incl. GST) $103,840.00


    Less Outgoings

    QPRC Rates (Approx) – includes water/sewerage and council rates $11,028.00

    Maintenance (Approx) $ 3,500.00

    Insurance (Approx) $ 5,679.00

    Management @ 5.5% $ 4,845.00

    Total Outgoings $25,052.00



    Total Net Income (incl.GST) $78,788.00


    I wanted to ask from people who have experience with Commercial Properties what are your thoughts on this as a purchase?

    Thanks
     
    eternit, 26th Oct, 2019
    #1
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  2. Archaon

    Archaon Well-Known Member

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    9% net? sounds like it to me, could be very wrong though.
     
    Archaon, 26th Oct, 2019
    #2
  3. The Y-man

    The Y-man Moderator Staff Member

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    Damn horrible that all the current tenancies end on the same day!!!!!

    The Y-man
     
    The Y-man, 26th Oct, 2019
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  4. Scott No Mates

    Scott No Mates Well-Known Member

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    All of the retail leases expiry 31/03/20 ie <6 months, have the options been exercised?

    Might be a very expensive mistake.
     
    Scott No Mates, 26th Oct, 2019
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  5. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    If they all didn't renew it could end up being a very expensive empty building.

    If I was the owner I would staggered the leases at the beginning so that they had different lengths and/or different option terms

    The value in commercial is not the rent amount but the lease. And those leases aren't worth that much if the options haven't been exercised.
     
    Westminster, 27th Oct, 2019
    #5
  6. eternit

    eternit Member

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    I should mention 2 of those tenants restaurant and florist have been there for over 20 years. Established businesses. Also residential unit very easy to rent out in the area as the vacancy rates extremely low.
     
    eternit, 27th Oct, 2019
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  7. ellejay

    ellejay Well-Known Member

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    You'd want to check out what the intentions are of the tenants with leases expiring. Sounds positive that they've been there long term, but there's an obvious risk that one or all of them might be moving on or closing down. Do you know why the vendor was selling?

     
    ellejay, 27th Oct, 2019
    #7
  8. geoffw

    geoffw Moderator Staff Member

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    That part of Crawford St has benefited from a street renovation - which did see some businesses struggling while it was still in progress.

    I'd suggest that there is a high likelihood of vacancies. There have been a lot in the Queanbeyan CBD over the years, sometimes a number at the one time. Standard retail has been replaced in a number of instances by charity shops, employment agencies and even on old folks day club. But the street renovation has given it a lift, making it a better part of the CBD than Monaro St.
     
    geoffw, 27th Oct, 2019
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  9. eternit

    eternit Member

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    Conflict between the vendors. Last year agent had a signed contract at 1.05mill but one of the owner refused to sign , it went to court and was ordered to sell via auction.
     
    eternit, 27th Oct, 2019
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  10. Scott No Mates

    Scott No Mates Well-Known Member

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    Depending on the lease, the options may have already had to to have been exercised ie 6 months prior or they could be in a 3 months prior window.

    Based on @geoffw the tenants may have already done it hard so analysis of the tenants ledger will be a sign of how they're performing.

    As for the Resi, this is only a small component of the cashflow and usually on a shorter, less secure lease.
     
    Scott No Mates, 27th Oct, 2019
    #10
  11. eternit

    eternit Member

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    The commercial upstairs has been used as resi for over 10 years and if rented as resi rent should be minimum $350per week and resi in that location will rent within a week. The other resi lease is with vendor and is rented cheap at $320pw and can easily get $350pw once that lease ends. That is $700 pw pretty much guaranteed rent from upstairs, so worst case scenario rent will be $36400 if all 3 shops empty.
     
    eternit, 27th Oct, 2019
    #11
  12. datto

    datto Well-Known Member

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    36K if shops are empty is not too shabby.

    If they do become empty an Asian massage centre springs to mind. A lot of those types of businesses are popping up.
     
    datto, 27th Oct, 2019
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  13. Scott No Mates

    Scott No Mates Well-Known Member

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    I may be missing something here, there is only one resi and the other is a commercial suite, there is no bathroom within the unit (can't increase the size of the plan). Is it compliant in all other respects eg fire safety?
     
    Scott No Mates, 27th Oct, 2019
    #13
  14. eternit

    eternit Member

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    there is a bathroom + extra toilet with the upstairs comm property which has been used as resi. Also full kitchen. 2 separate entries to it from front and back.
     
    eternit, 27th Oct, 2019
    #14
  15. geoffw

    geoffw Moderator Staff Member

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    I don't like the look of the commercial unit as a residential. It's too much of an open space which doesn't suit the cold conditions here so much; I'm not sure about the insulation. The unit looks far better - it at least has a ceiling, and is much more suitable as a resi. But the location should ensure that both are in good demand.
     
    geoffw, 27th Oct, 2019
    #15
  16. chindonly

    chindonly Well-Known Member

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    I would be interested in the future development upside. Three street frontage.
    If it costs you nothing to hold and there are good future CG prospects, I would call it a good purchase.
     
    chindonly, 20th Nov, 2019
    #16