47 ANZ Banks for sale

[Kristine..]

Well, I bought a Challenge Bank building in 1997, so I've had it coming up for 11 years.

The building was originally constructed for the Hotham Building Society, and it had been Statewide, the RESI, and Challenge (at least) until Bank of Melbourne / Westpac sold off 87 branches when these were no longer required.

The Agent showed so little interest they couldn't be bothered making appointments for inspections, and the Section 32 was available at the auction - pinned, page by page, to a felt board leaning up against the window of the bank.

Real class!

The opening bidder was the Manager of the Bank of Melbourne. There were no other bidders than us. We paid about $10,000 too much after the auction and watched as the value fell for the next two years - as evidenced by our rates notices!

However, the property is now worth about three times what we paid for it. Prime retail locations will always be in demand, even though at 90m2 this is quite a small footprint. One day I will build a second storey apartment.

We went without quite a lot for the first two or three years to pay for this property, but it is, without doubt, the Jewel in the Crown

I would buy it again in a flash.

Cheers

Kristine

 

[GIDDO]

Well done for "hanging on" Kristine.
Good things come to those who wait, or something like that.

Seems to me that these buildings WILL have a life after the ANZ is finished with them.
Get your 10 years of nice safe lease payments.
Then let the moths out and convert to solicitors offices or similar. You have plenty of time to plan a strategy.

There are lots of old bank buildings in rural and regional places that have made really great offices for lawyers, accountants, real estate agents.

The old CBA bank in Mundubbera Qld now houses a firm of accountants for example.

The only question is the original question which not many people want to have a go at.

Where is the money in this deal?
My answer:

Probably way down the track, after the 10 years is up. You will be locked into the lease till then; and I doubt that the yield will cover interest payments, even allowing for interest rate fluctuations over the 10 years.

(I haven't done any DD on this - just participating in the forum and offering an opinion based on my meagre and humble experience in RE investing.)

 

[buzzlightyear]

Well done for "hanging on" Kristine.
Good things come to those who wait, or something like that.

Seems to me that these buildings WILL have a life after the ANZ is finished with them.
Get your 10 years of nice safe lease payments.
Then let the moths out and convert to solicitors offices or similar. You have plenty of time to plan a strategy.

There are lots of old bank buildings in rural and regional places that have made really great offices for lawyers, accountants, real estate agents.

The old CBA bank in Mundubbera Qld now houses a firm of accountants for example.

The only question is the original question which not many people want to have a go at.

Where is the money in this deal?
My answer:

Probably way down the track, after the 10 years is up. You will be locked into the lease till then; and I doubt that the yield will cover interest payments, even allowing for interest rate fluctuations over the 10 years.

(I haven't done any DD on this - just participating in the forum and offering an opinion based on my meagre and humble experience in RE investing.)

Giddo I tend to agree with your comments.

Whilst I haven't really looked at these types of commercial properties before and would defer to the experts in this area, I have seen other retail buildings in the eastern suburbs of Melbourne, attracting prices forcing yields to only 3-4%. These didn't have tier 1 tenants like the ANZ, so you would have had to at least put up 20%+ as a deposit. At least with the ANZ as a tenant, my understanding is that you can potentially borrow more. Still makes the investment cash flow negative..

 

[redwing]

I had a look and worked the numbers on a 5% Yield and then a 6% yield to give a "rough" Indication of price

 

[TommyR]

Perhaps if anyone was really interested they could apply to the ANZ for finance, if these properties are such good investments they would be leaping out of their corporate skin to provide finance

Tom

 

[Dazz]

Perhaps if anyone was really interested they could apply to the ANZ for finance, if these properties are such good investments they would be leaping out of their corporate skin to provide finance

Tommy,

If you were familiar with the way adversarial legal contracts are drawn, and a formal Lease between Landlord and Tenant is a prime example, you would know this is impossible, and would be a clear conflict of interest between the two parties to the contract.

A Tenant cannot finance and assist the Landlord in purchasing the Premises to be leased, and then expect to be the Lessee.

The Lessor would be beholden to the Tenant, and if you've been involved with a commercial transaction, you'll know you'd never want or more importantly be allowed to subjogate your negotiation position as badly as that.

The ANZ solicitors would never allow it. In short, "they would NOT be leaping out of their corporate skin to provide finance", but then that would be no indication whatsoever as to the merit of investing in the property or not.


Hard to tell with a short two line retort w.r.t. your tone, but I gather your comment was a red herring to stir the pot, if it was.....good one, I bet you hooked a few with it.

 

[TommyR]

Yes Daz,

I concur on every point you made

Tom

 

[RPI]

This may be a good investment in the medium term (ie. sell after 5 plus years). I am not sure of ANZ's reasoning of course but this sort of technique is often used as a quick money making deal where the business and freehold are sold together

I'll give rough figure's below

Buy a business for $500,000 grand say in an industry that sells ate multiples of 2.5, ie it will be netting $200,000

There is freehold sold with the business for $1m

Buy both using one entity for the business and one for the property.

Rather than rent the property for $80k (8%) you sign the lease for $100k at 5+5+5 with cpi reviews etc ie favourable to the landlord

Business should now re sell for $450k as the 20K reduction in net profit reduces sales price 50k due to industry having establish 2.5 multiple

The building can now be sold any day of the weekk to a different buyer at 8% net return with a strong lease for $1.25m.


Some corporate's (a major fuel company for one) and a number of franshors use this model in that they develop a new site sell the business to a franchisee and then sell off the developed property at a nice profit. Their slightly above market rent again has minimal effect on the business value but much more effect on the property value. These franchisors have worked out they they can make signifcantly more from their property development arm than their franchisees.

Back to ANZ. The yield will be less than 8% being the nature of the tenant.
so put the rent up $10k a year at a 6% return puts up the value of the building $166k. Seems to add up to a bit more than break even over the 10 years (10 * 10K + 4% compounding) However as an instant increase in the balance sheet and the returns available over the 10 years by the bank using the money for other investments, overall a very profitable deal.

Not that this is necessarily a bad thing for the new building owner but just that this is a good way to increase the sale price of their asset which won't affect the investor's yield over the decade but is very dependent on whatever happens at the end of the 10 years ( ie could you of got a greater capital growth over the decade by buying a more keenly priced building, will the rental drop, building be hard to rent out (old school safes are hard to remove, etc etc)

 

[markp]

If you could crack a deal with access to unlimited discounted mortgage funds (a highly unlikely scenario ) it might be worth buying, otherwise I wouldnt touch it with a barge poll.

 

[grossreal]

hi all
interesting post for three reasons
1. I have been mentioned
2. dazzling has asked who owns this type of property.
well yes I do.
and 3 wher is the money.
well thats simple and its in the lease.
if you buy at say a 6% return ( and it is a bit low for me) with a 4% annual and say the net return is 100k in 5 years the income is 121k net now at a 6% return the valkue was 1.66 mil the value at 121k is 1.016 mil so in 5 years you have a growth of 350k so thats a 70k per year increase.
now people will say but the return against your cost of money(9%) is 3% which would be 49k so is it attractive maybe not but I have not seen the returns nor have I seen the what they are going to sell for.
and with regards to the banks down sizing that is not a negative that a positive.
the lease will have in it that the out going tennant must rectivy the building so you get a tennant before they leave.
the new incomming tennant will have certain requirements and you get the out going to pay for them.
and then they are a rolling lease in essance.
my bank was vacant for 1 week last time as the paint required time to dry.
and yes it is in a good position.
purchase.
400k
3 years later reval 650k
2 years later reval 890k

just doing reval 1.2 mil
so in 6 years a 333% return.
and posi all the way thru.
and is one of the best investments that we have purchased.
but they are sold on returns and I will have a look but I don't buy at auction to much compation for me.
I am just buying two comm
purchase 1.2mil
bank val 1.4 mil
external val 2.1 mil with 5% annual increase.
10.5% net return
the other is
purchase 1.45mil
val 2.5mil 5 % annual
13.25% net return
both cbd sydney.
so the banks may have to wait for my money.
if anyone is serious about any of the banks and you have done your checks and balances pm me and I will run the numbers but I ain't going to run numbers on all 47 just for the purpose of running numbers.
I don't buy this type of property on a 6% it would have to be upwards of 8%
and then the 4% or 5% (my prefered is 5%) does kick in over time and they are better then resi.
if and here the if you buy in the right place I would not look out side of major cities and see today who would lease other then a bank and plan around that.

 

[Humphrey]

Thanks GR, there's a lot of great information in that post.

I'm curious about one of your current deals:

purchase 1.45mil
val 2.5mil

What factors allow you to purchase at only 58% of full value? Or were you talking about future value?

 

[ManyManeuvers]

interesting to see such a large sale in one hit from a major bank...
my first impression is they are in trouble, however upon a few seconds to ponder, i would suggest the 'why ANZ is selling' is due to:
- transfer funds from to asset of greater return (loans)
- trend of banks to smaller, more locations with flexible fitouts to suit changing demands/ demographic, etc.
- ANZ is expanding to asia every year, and i'd expect they are confident the ~25mill from these sales is better spent in Cambodia / China/ ??

disclaimer: the author of this post is overweight in ANZ (MQG, NAB) :|

 

[kero]

i'm not very familiar with commercial properties investment... building codes requirements change every year, i am wondering how do you guys (who are involved in commercial ppty investment) cope? i was involved in a shopping center major extension & with increased floor area & volume, the shoppping center had a requirement to install sprinklers & upgrade existing fire protection system. i wasn;t involved in the financial side of the project but i knew there was a lot of pushing around as in who should foot the $1m bill.

anyone care to share?

 

[redwing]

i'm not very familiar with commercial properties investment... building codes requirements change every year, i am wondering how do you guys (who are involved in commercial ppty investment) cope? i was involved in a shopping center major extension & with increased floor area & volume, the shoppping center had a requirement to install sprinklers & upgrade existing fire protection system. i wasn;t involved in the financial side of the project but i knew there was a lot of pushing around as in who should foot the $1m bill.

anyone care to share?

My understanding was that Buildings only had to meet the current requirements when built, there is no need to upgrade each time there are improvements available (Fire Indication Panels, systems etc)..though in some cases it may be a good idea

I've seen Some Buildings that dont even have Fire Systems (most seemed to have sensors)..but met the code when constructed, others on the grounds and as part of the same company/group have the latests systems

In wat you say, the expansion/extension would mean they had to meet current codes for that area

 

[WashingtonBrown]

Seems to me all the newer buildings have 10 year leases and the older ones 5 years to commence with.

Might be a renewal clue?

Also the safes in these things are never cheap to move and the buildings tend to be purpose built.

Regards

 

[kero]

My understanding was that Buildings only had to meet the current requirements when built, there is no need to upgrade each time there are improvements available (Fire Indication Panels, systems etc)..though in some cases it may be a good idea

I've seen Some Buildings that dont even have Fire Systems (most seemed to have sensors)..but met the code when constructed, others on the grounds and as part of the same company/group have the latests systems

In wat you say, the expansion/extension would mean they had to meet current codes for that area

Hi redwing,

in where i worked, its very seldom approvals for commercial projects are done in retrospect. e.g. a 50m2 ground floor extension would affect the travel distances, thus affecting the location of fire exits... and thus, the whole building. saying that, not all refurbishments or extensions requires fire systems. it really is a case by case basis, mostly governed by class of building, total floor area and volume.

depending on the degree of refurbishments, some might require upgrades and some might not e.g. technology for fire indicating panels especially the computerised chip in them changes quite quickly. so upgrades or add-ons are very difficult when the FIP is an old one (not compatable). especially for huge offices or shopping centers, the council & fire bridage would want the owner to upgrade the system to link to the fire dept (not all FIP are linked to fire depts) etc... same as sprinklers.

insurance might also be affected.

 

[Dazz]

Well, first of the 47 auctions kicks off in 30 minutes....I'm off to take a squizz.

 

[Ausprop]

is that the west perth one? that looked interesting. taking the cheque book?

 

[eggnog]

If anyone does attend the brisbane auctions tommorow could they post the details here

 

[Welcome]

Missed the Adelaide ones by a few minutes but the yields ranged from 4.17% (Nth Adelaide, $3.3m) to I think 7.25% for one in middle of nowhere.