Case Study - Commercial Deal with High Yield

Posted 1 Mar

Case Study: Commercial Deal with High Yield

by Peter Ambrose on
Article appears under: Commercial Property, Case Studies

This is a short overview of a recently completed commercial property purchase through the iFindProperty buyers agency service.

The brief for the search we helped the client to settle on was for:

  • Industrial or Warehousing
  • Anywhere in New Zealand
  • Budget up to $1.4m.

We reviewed several candidate deals over the time of the search, and came very close to buying a property near Palmerston North with upside.

Just before Christmas, I found an interesting deal in Auckland that on the surface had the potential to be very good. It had some tenancy risk with an iffy lease, however with some good management and locking in a more favorable lease, this could be turned into a great buy and give my client the opportunity to quickly revalue and buy again in the commercial space. Credit to my client, he saw and took the opportunity and so far everything is going to plan.

The property he bought is a 2 income-stream showroom/office in Penrose, Auckland which includes 7 car parks.

The groundfloor lease was steady, but the upstairs office was about to become vacant. This presented some risk, however it has only been a couple of weeks since settlement and my client took my advice about proactively finding a new tenant, and already has an interested party going through the new lease agreement.

The deal was secured at $1.38m + fees. This property previously had a valuation of $1.95m and with the potential securing of a new tenant upstairs, will take the annual NET rent to around a 9-9.5% cap rate. Once the property is tenanted the client will revalue, refinance and be able to continue to invest in commercial. 

[Update April 2024] With a new tenant secured, the results are below:

  • PP $1,414,500 (incl buyers agency fee)
  • Downstairs Lease $63,372.83 pa (NET)
  • New Upstairs Rent $67,860pa (NET)
  • Total NET Income $131,232.83
  • Cap rate 9.28%

We are obviously very happy with this outcome, as our buyer secured a property in a way that leaves them buying power to continue to grow. To learn more about commercial property investment and take that next step in your property journey, please get in touch. 

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Hamilton is a proven fantastic location to invest, providing strong long term capital growth and rental demand. Employment opportunities in the region have resulted in a population increase of over 23% in the last 10 years.

It's not just about finding a deal, to truly grow as an investor you need to plan towards your end portfolio and work with people who can help you move towards that vision. iFindProperty has a service that achieves that for clients, and we are excited to share it with you today.