Help - local goss on Canberra Office

[Dazz]

Hello chaps from Canberra.


I have my eye on the following building. Take a squizz at the link.

http://www.realcommercial.com.au/cg...p=10&id=5442064&ty=&fmt=&header=&s=act&snf=as


Would it be possible for one of the Canberra forum members to wander past the place and give me their honest opinion about what they think of it, the location, and all of the surroundings.


I'm looking for warts and all reports - the uglier and more brutally honest the better.


Owners seem to be very flexible on the price.


Attractive attributes for us are :

11% yield
Main tenant is the Federal Government
Leases and options out to 2021


Any help from the local Canberra folks would be most appreciated.

 

[Mooze]

The old airservices australia building from memory. Dreadful corner as far as traffic is concerned (two main drags). likely to recieve competition from the new offices close to ANU (four new ones are up (I think), more to come), as well as the airport area. A lot of gov't offices are looking to move back into CBD after trying to move out near airport and gungahlin (internal revolt from staff). Will walk past or drive past Thursday if you've got specifics you're after.

 

[geoffw]

The ad says 8% yield, you say 11%. So they must be extremely flexible in price.

Government is cutting back. So I'd check out the exit clauses.

But I'm wondering why you are asking about a $28m property in this forum. Without coming to town yourself and checking it out. I'd ask about a $400k property, but not one that expensive.

Unless your purpose is more to impress the forum than to seek their help.

 

[grossreal]

hi TPFKAD
couple of things
not sure how it got from 8% to 11% and it says yield not net net yield but will leave that to you.
for me this is a fund property not had a look who owns it but it will be a fund
so for me 65% of the 27.5 is my look at it if it values up at that value for me it won't
I take it a 2.2 mil p/annum and at 11% and thats what they are upto on this type of product puts it at 20mil
so I'm at 13mil for it and thats 16% yeild less outgoings will bring it back to about 13% net net and then its fine.
if these are your numbers thats fine if you are around the 22 to 23 mil for me its high.
was down there about 3 weeks ago
not looking at comm
don't wish to tell you how to suck eggs but this product is in the bag of the current type of property we are looking at and 65 to 70% is the ball park.
also need to look at the leases to see what they have agreed to
the central bus district is fine in canberra the main problem for me is that there is alot of comm being developed and there is only one major industry
the government.
the above I don't think will help as you may already know.
but you have to look at those vals
a client of mine revalued his properties and two drop 10 mil in 12 months
not because they were not worth the money but because the cap rate has gone from 6% to 9 and in some cases 12% and I would think canberra is in the 10 to 11% net cap rates
he does not need to sell just looking at equity position
but I would be very interested in the cap rates for canberra on comm.
is 12 months cbd syd cap rate has gone frome 5.5% to 8% thats a big jump
thats not sales cap rates thats valuers cap rates and they are very different.
if you are paying cash thats fine
if not
and if you get it wrong

 

[grossreal]

hi geoff
this is a comm area and there is very little to buy in the 400k area of comm that gives the net returns to make them worth while.
there is alot in the market in the 3 to 10 mil area as the funds have to conform with there leveraged positions so there will be alot of these on the market and alot of people of this forum I think can buy into the 3 to 10 market without much problem if they wish.
and on my numbers that 27 mil comes back to 14 mil
and there are a few that I know here that would have a go at a property of that value.

 

[Francesco]

One of the ground floor tenants seems to be operating a free breakky for the needy in the morning on the pathway. If one drives along Northbourne Avenue in the morning, one can see a gathering of casually dressed people (5-15) apparently waiting for a handout. Not sure what this does to the value of the property but may colour the usage of the building.

 

[Raddles]

Hi there
this media release may be of relevance

Media Release
A Leasing Success For Bennelong’s $27.9 Million Investment
The Bennelong Real Estate Group has successfully leased its property at 73 Northbourne Avenue in Canberra, left vacant by the recent departure of Civil Aviation Safety Authority (CASA).
The property managers for 73 Northbourne Avenue, Knight Frank in conjunction with Raine & Horne, successfully leased the whole building prior to the lease expiry date for previous tenants, CASA. Nicola Cooper of Knight Frank said “the matter of leasing success speaks for itself, we were able to fully lease to three big tenants, they signed off before the tenant (CASA) left the premises. 73 Northbourne was “a real success story”.
The building is prominently located on the western corner at the intersection of Northbourne Avenue and Barry Drive in the Canberra CBD. Not only was locality important to Australian Fisheries Management Authority (AFMA) but “AFMA choose 73 Northbourne due it best suiting our needs” said Julie Watts, Property Manager, AFMA.
Bennelong has made a $3.5 million capital reinvestment into the property to upgrade the mechanical and electrical systems, to bring the building up to a 4-star ABGR rating.
BankWest will occupy all of the ground level. Dixon Advisory, a national superannuation group, will be moving onto Levels 1 & 2 given AFMA have now moved into its permanent integrated fitout on levels 3 through 6 after occupying temporary accommodation on Levels 1 and 2 while its new floors were being remodelled.
The Canberra leasing market is currently experiencing a high demand which has been mainly dominated by the largest occupier of office space, the Commonwealth Government.
“Canberra is a unique market, unlike other markets”
According to Cooper, “Canberra is a unique market, unlike other markets. Canberra has traditionally taken 25,000 of space per annum and now figures are about 60,000 per annum, which is driven by Government and Government Policy.”
According to CBRE's Third Quarter Market Overview, Canberra City witnessed growth of 5.3% in prime gross face rents over the twelve months to September 2006 to an average of $380/sqm.
Not only is there a low vacancy rate, currently standing at 1.7% according to PCA figures in Canberra CBD, Canberra is also experiencing a construction boom as Government departments are committing to new building developments. "By mid year of 2007 to the next 12 months we will see a jump in the vacancy rate and reach 8-10% vacancy rate thus providing a healthier market" said Ms. Cooper.
Bennelong is currently seeking to raise $300m from institutional investors to continue its non-CBD commercial story

thanks

 

[Dazz]

Dreadful corner as far as traffic is concerned (two main drags).

Thanks Mooze. Looked busy on the map....which is what we are specifically looking for. 2 or 3 lanes both ways by the look of them. More the better for our purposes.

A lot of gov't offices are looking to move back into CBD after trying to move out near airport and gungahlin (internal revolt from staff).

That sounds like a good thing and augers well for a CBD property.

Will walk past or drive past Thursday if you've got specifics you're after.

I'll PM you with specifics Mooze. Thanks for the offer. Exactly what I was after.

 

[Dazz]

I'd check out the exit clauses.

Already done Geoff. Going thru the DD process as we speak.

But I'm wondering why you are asking about a $28m property in this forum. Without coming to town yourself and checking it out. I'd ask about a $400k property, but not one that expensive.

Geoff, I'm constantly checking out properties all over Australia. High level skim then discard for most, burrowing down deeper for the ones that catch my eye. I imagine most others on here do the same. I don't have time to continually jump on a plane every time something catches my eye.

I've asked for some help on the ground by the Canberra forum members. If you wish to tell me to get stuffed - no wurries.

Unless your purpose is more to impress the forum than to seek their help.

That's low Just Geoff - maybe you've made one too many foot long subs. Cheer up son, you're not talking to one of your little 16 y.o. casual workers now.

You'd be quite surprised how perceptive some ordinary folks can be at ground level. The feedback they give is usually honest, to the point and no fluff. Please don't write off their attempts before they even have a crack for me.

 

[Dazz]

Thanks GR - always insightful. I'm not as brave as you - couldn't approach a Vendor with an offer that low.

You are right though, the rental figure is a gross yield. Nett yield is low 9's, still attractive enough for me to have a sniff. I'm easy to please.

Big question for me down the track is, what is the rental market for that exact spot going to do in 2012, as that is when the market reviews kick in for the Lease. We've seen how powerful they can be (life changing).

Looking to buy and forget with this one.

Do you have any on-the-ground info about that area ??

 

[Dazz]

One of the ground floor tenants seems to be operating a free breakky for the needy in the morning on the pathway. If one drives along Northbourne Avenue in the morning, one can see a gathering of casually dressed people (5-15) apparently waiting for a handout. Not sure what this does to the value of the property but may colour the usage of the building.

Thanks Francesco - that is exactly the type of info I was looking for.

Ground floor is exclusively a Bank, so dunno what is going on there. Good info though....top stuff.

If the Tenant complained at all, the Lease says the Landlord would need to fix the issue, so that may be costly.

 

[Dazz]

Thanks raddles for that article. I have the three Leases for the three Tenants, so have most of that info, but didn't know it was the old CASA building.

Bennelong is indeed the Owner and Lessor. It wasn't little Johnny's signature on the Leases though, but that's not to say this thing isn't his little retirement nest egg.

Thanks for doing some digging.

 

[geoffw]

Dazz I was out of line. I'm sorry. It was an unusual sort of post for you and I took it the wrong way.

 

[Mooze]

Yep that's either the uniting care or anglicare morning breakfast area for the homeless.

Northbourne = three lanes each direction, Barry drive is two lanes. Only one lane from Northbourne going into Barry and is painful in the mornings due to no specific green arrow, so you're dealing with the pedestrians the whole time (people walking into the city). Barry Dr. is the main road to ANU (two blocks back). Next door (barry dr) is residential with a turkish pide house restaurant (not open on a sunday). Also might be worth checking out what's going in at the old cinema (two blocks east), and also what the progress is with the new part of the mall being expanded (being done in sections).
Also Melbourne and Sydney buildings are about two blocks south on northbourne, these are getting a bit old and decrepit, govt (not sure who is responsible for that area - fed or local) is apparently trying to force LL to clean up those buildings (would make whole area a lot better)

Govt is biggest employer in Canberra, however getting a lot of other whitecollar services as well. Biggest issue is lack of accomodation (rentals) around town, highly transient population with the latest unemployment rate at 2.7%. No one likes working near the airport (Brindebella business park) due to pay parking only, lack of services (only one or two highly overpriced cafes) and traffic issues (although this is in the process of being resolved with a doubling of the roadway out there). Gungahlin is also just too far out of the city - dep immi tried to move out there and have had a highly negative response from staff, looking to bring their office back into City or Belco.

 

[WillG]

Dazz & Grossreal,

These deals are very interesting - thanks for posting.

How does a resi-investor get into the 3 - 10mil commercial game? Is this via vendor finance?

there is alot in the market in the 3 to 10 mil area as the funds have to conform with there leveraged positions so there will be alot of these on the market and a lot of people of this forum I think can buy into the 3 to 10 market without much problem if they wish.

 

[grossreal]

hi willg
simple
join a group that invests in 10mil property.
vendor finance is but one way
I have been in a meeting today for 9 hrs and the investor group does not use cash at all
nor do they use fuzzy dollars, bbx or barter card
but use commodities so was very interesting and I learnt heaps.
so there are lots of ways
you just have to invest
and unfortunately I can posts the s
indicate info here

 

[redwing]

Just had a flashback to this post Digesting the Boar, that Anaconda must be feeling peckish again

 

[Dazz]

probably sit back and relax for 2 years or so

That was written back in '07.....so fair do's.....whaddayarekon Mr Wing ??

 

[redwing]

I reckon if i saw that Anaconda coming I'd lickety split and get the bejezus outa there Mr Daz, he's getting to be one big Sammy Snake

 

[Dazz]

Dazz I was out of line. I'm sorry. It was an unusual sort of post for you and I took it the wrong way.

I must admit, it's been a while since I genuinely asked for help from the forum, but in this instance I am indebted to the folks who have helped me already with their local knowledge - it is worth alot to a complete outsider.


I'm especially grateful to Mr coffee, who sent me some amazing hi-tech links so I could have a squizz at the place from all angles. What a wonderful piece of IT. Being a techno-dunce, I was well impressed.