Off-Market Purchase from Listed Property Trust, 9.1%+ net yield
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Purchase price: | $12,400,000 |
| Asking price: | $12,800,000 | |
| Negotiated discount: | $400,000 | |
| Bank valuation: | $12,400,000 to $12,800,000 | |
| Net passing yield: | 9.1% | |
| Property age: | 3 years old |
HOW DID WE DO IT?
Prosper Group’s extensive industry contacts enable us to deal direct with vendors. We were able to access this opportunity off-market, so it was not advertised to the public.
After performing due diligence on several properties across the east coast of Australia, we made an offer on this Sydney industrial property. The property is only a few years old and has a multi-national tenant with 7 years remaining on their initial 10 year lease term, so met all our clients’ criteria.
OUR NEGOTIATION STRATEGY
The tenant was paying a lease rate of $126/m². Our due diligence identified that current lease rates for similar properties were around $110/m2 - not taking into consideration the extensive hardstand area and this particular buildings capacity to run three gantry cranes. As part of the negotiations, Prosper Group applied a discounted present value calculation on the portion of the rent that was over and above current market rates. This ‘overage’ was then applied for the remaining period of the initial term to arrive at an offer price significantly less than the asking price.
We made an offer in line with the ‘overage’ calculations mentioned above. In the end this price was accepted as we offered an efficient due diligence and settlement process and had a reputable purchasing history. In today’s market, vendors are only going into due diligence with purchasers who provide a confidence for completing the transaction. Vendors are looking to reduce debt and don’t want their time wasted.
Further we negotiated an additional $31,000 rebate on settlement for repair and maintenance works. Our due diligence identified several issues that we insisted were addressed or equivalent cash rebated on settlement.
A HAPPY CLIENT
Prosper Group had conducted extensive due diligence and negotiations on several properties for our client prior to this transaction. On all prior properties we advised our client to walk away from the purchase because of issues we uncovered during our due diligence and financial analysis.
The property we ended up selecting is located in Erskine Park which is a rapidly growing industrial area strategically positioned close to the M7 and M4 major road infrastructures and surrounded by affordable housing and a high employment catchment. Being only 3 years old the property investment offers generous depreciation benefits along with a very strong yield.
WITH US ON YOUR SIDE YOU TOO CAN GAIN THESE UNFAIR ADVANTAGES OVER OTHER COMMERCIAL BUYERS
Prosper Group are not developers and do not sell or promote property on behalf of anyone, we act solely for the buyer in obtaining the best possible opportunity available in all markets across the east coast of Australia.
If you are interested in gaining access to similar off-market opportunities and having Prosper Group’s extensive skills and experience on your side than call us on 1300 664 373 or email on enquiries@prospergroup.com.au.
