Park & Fly Carparking Space
- Thread starter Scott No Mates
- Start date
Price of fuel
It wasn't long ago that the price of fuel was $1 per litre. It is now $1.50 per litre. How long before it is $2, $3?.??
At some point the economics of this will bite. Planes will get less use, cars will get less use. Trains at least will get more use?.
You are looking at an investment that has a low net yield (6.5%), and uncertain short term future (additional car parks, alternate airport, council policy change train fares) - and i would suggest a poor long term outlook (high cost of fuel having multiple impacts)?
Not an investment i would choose.
Wobbly
It wasn't long ago that the price of fuel was $1 per litre. It is now $1.50 per litre. How long before it is $2, $3?.??
At some point the economics of this will bite. Planes will get less use, cars will get less use. Trains at least will get more use?.
You are looking at an investment that has a low net yield (6.5%), and uncertain short term future (additional car parks, alternate airport, council policy change train fares) - and i would suggest a poor long term outlook (high cost of fuel having multiple impacts)?
Not an investment i would choose.
Wobbly
Why would anyone buy a tandem carspace (nose to tail parking, where the rear out parks the front car) when for the same price you could buy two side by side carparks?
Not quite RightValue......they are giving a $ 10,500 discount for the tandem's as opposed to two singles.
The big no no for me is the fixed 4% increase at option take up. **** that !!
The 3% p.a. increases during the initial 5 year term is OK, but the 6.5% initial net yield seems low. The Seller is creaming off all of the good stuff before you even get in on the deal.
Thereafter, the Lease is completely locked in for the Tenant's benefit for the next 20 years. At no stage does the Buyer get a look in to negotiate with the Tenant on the off chance the rental market goes thru the roof.
With everything locked away between Seller and Tenant, the Buyer is being played for a 20 year patsy. One of my golden rules is never be the Buyer when the Seller becomes the Tenant, or the Seller and Tenant stitch p a deal without your involvement, and you come along as Johnny come lately. The deal has already been done and you are simply the patsy.
With only a 5 year surety in the eyes of the Bank at the start and whenever (if) the Tenant decides.....on the already agreed terms....to take up any of the 3 options available to them.
Where's the upside ?? The only upside for the Buyer would normally be a favourable market review at option take up, where the rent has the possibility of jumping 10, 20 or 40%. That jump is what you need to add value to the capital. This has been taken away. It's fixed at 4%. Negotiated and agreed before you even came on the scene.
If you purchase it, another Buyer coming along will probably only offer you an 8 or 8.5 or 9% net yield, which means your capital value will take a big dive. They ain't gonna pay you 15.38x net earnings (i.e. a 6.5% yield). You won't be some big shot developer with glossy brochures. You'll be some Ma and Pa Nobody with a sad carpark for sale. The most you could hope for is maybe 11x net earnings, or 9% net yield.
If interest rates on borrowed funds rises above 6.5%, you're going backwards....not as bad as residential on cashflow grounds, but still not good.
No mention of maintenance. It might be low, but after 20 years, it's gonna need some work. The real details will be covered in the Lease no doubt.
To me, it looks like a Bond yielding 6.5%, with all of the associated risks of property as an added headache.
The big no no for me is the fixed 4% increase at option take up. **** that !!
The 3% p.a. increases during the initial 5 year term is OK, but the 6.5% initial net yield seems low. The Seller is creaming off all of the good stuff before you even get in on the deal.
Thereafter, the Lease is completely locked in for the Tenant's benefit for the next 20 years. At no stage does the Buyer get a look in to negotiate with the Tenant on the off chance the rental market goes thru the roof.
With everything locked away between Seller and Tenant, the Buyer is being played for a 20 year patsy. One of my golden rules is never be the Buyer when the Seller becomes the Tenant, or the Seller and Tenant stitch p a deal without your involvement, and you come along as Johnny come lately. The deal has already been done and you are simply the patsy.
With only a 5 year surety in the eyes of the Bank at the start and whenever (if) the Tenant decides.....on the already agreed terms....to take up any of the 3 options available to them.
Where's the upside ?? The only upside for the Buyer would normally be a favourable market review at option take up, where the rent has the possibility of jumping 10, 20 or 40%. That jump is what you need to add value to the capital. This has been taken away. It's fixed at 4%. Negotiated and agreed before you even came on the scene.
If you purchase it, another Buyer coming along will probably only offer you an 8 or 8.5 or 9% net yield, which means your capital value will take a big dive. They ain't gonna pay you 15.38x net earnings (i.e. a 6.5% yield). You won't be some big shot developer with glossy brochures. You'll be some Ma and Pa Nobody with a sad carpark for sale. The most you could hope for is maybe 11x net earnings, or 9% net yield.
If interest rates on borrowed funds rises above 6.5%, you're going backwards....not as bad as residential on cashflow grounds, but still not good.
No mention of maintenance. It might be low, but after 20 years, it's gonna need some work. The real details will be covered in the Lease no doubt.
To me, it looks like a Bond yielding 6.5%, with all of the associated risks of property as an added headache.
The structure is already 20+ years old. At the end of the lease it will be close to 40 yrs. What is the life of post-tensioned cable holding the super-thin slabs?
