lizzie said:
thanks for letting us know your strategy, dazzling. an interesting glimpse and makes one want to hear more. was it hard work bringing the rundown commercials back up to scratch? what was involved?
They were all industrial sheds constructed in the 60's and 70's. Not flash commercial buildings like what most people have in their minds eye. Very ordinary tin sheds sitting on prime big chunks of dirt close to the CBD.
The work wasn't very difficult, mind numbing in fact, just alot of picking up other people's garbage that had accumulated over many years. Bobcat's and trucks and human hands and backs are great for this, along with rakes and brooms and bins....pretty basic stuff I know but makes a hell of a difference to the outlook of the place. One prop had 88 tonnes of rubbish removed from it. We found messy people absolutely will not pick up their mess. They are simply blind to it. We were pleasantly surprised to find a nice 8' high security fence around the perimeter, which was hidden from view.
The difficult bit comes when personally confronting illiterate tradesmen and general scally wags who think that the shed, after being their home for the past 15 years - some even live on site - despite strict council regs banning this, should be theirs for free and no need for paperwork, rent or leases. We found lawyers and letters and PM's completely useless dealing with these people. They tear letters and eviction notices up in your face, usually 'cos they can't read them. They usually get the message when the bobcat and truck have finished with their garbage. It speaks their language.
Negotiating leases was a big challenge, especially when the Directors of the corporations were in Sydney and Melbourne. Writing the 48 page leases up and going head to head with their hoighty solicitors was also a good experience. It gets easier and easier as the deals go through.
Having great tenants commit to a long lease and dealing with responsible people who actually commit to what is written in the lease and are very familiar with contract law is a breathe of fresh air. This is one of the most enjoyable aspects of owning industrial property.
I suppose the other is having the Directors undertake extensive renovations on our properties to modernise them. When they are after large laydown areas, the buildings become secondary to their requirements. If they have 5 x 40' containers and a constant stream of semi's circling the building, truck access and manouverability becomes crucial. Big land helps this and they are forced to pay a premium for this.
Turning a prop. around from a dingy dust covered tin shed to a place that a large corporation is proud to call their head office is certainly satisfying. Having the bank valuers go out there, with fully executed long term leases under their arms is obviously the end of the line. Once you're at that stage, it's usually time to trot off to the bank and do it all again. It is starting to wear a bit thin though, all of this confrontation with rat bags / negotiation / arguing with lawyers / revaluing. This is why we are looking at maybe office blocks in the CBD. Buy something where most of the work is done and the existing tenants are able to read and write properly. Who knows ??
Prices vary a great deal depending on the area and access to major trucking routes. I still think you can pick up a decent standard say, 100sqm office with a 500sqm warehouse in the metro area for the same price as a normal 4x2 in a metro area. These are popular with owner occupiers. This isn't our cup of tea and so haven't explored that too much.
Scale is important I believe to get a decent percentage return, having seen some of the reasonably large deals on offer. Big corporations don't quibble over price too much. If they need it for their operation, they'll pay the price. The rent is just another cost of business, written off against tax. My experience is the Directors are more concerned about getting the right sized place and right position. Once these are sorted, they concentrate back on making revenue for their business - the rent impost is way down their priority list.
