Hi Fellow Investors
Not sure whether to post here or in the legal
Chasing your thoughts on this situation and hopefully some insight into the pro’s and con’s
A Property Investor has a commercial lease on two units (both under 50 sqm) in a short term holiday complex. Their lease is to the management company and has been in place since late 2000 and the units were purchased for $120,000.00 each, so $240,000.00 in total. The rest of the properties (70 units) in the complex are short term rentals owned by various investors.
Rent for the Property Investor has not increased in the last 10 years despite rental reviews (the management company gets someone to review the rent as does the Property Investor, this has always resulted in no increase over the years) and costs have been ongoing for repairs of which they are a party to as unit owners, with the sinking fund now at low levels. Rents for the units in the complex have increased over time- however payments have not due to ongoing costs.
The carrot at the end of the stick is redevelopment opportunity and the value of the land, due to its prime location - as many older holiday rental complexes nearby have been redeveloped.
The commercial lease is due for renewal soon so the Property Investor is looking for a local solicitor to draw up a new lease, having had enough of the old one.
The properties have increased in value from $120,000.00 each to approximately $280,000.00 each over the 10 years based on comparative market sales. Accessing the equity is an ongoing problem as the units are under 50 sqm and has previously only been allowed at 50-60% LVR which in past years has not been worthwhile
The Carrot
If the property was sold to a developer in the near future and that’s a big IF - due to the tightening of credit in recent Financial Crisis years, but selling for big dollars to a developer is the end goal.
Do all owners have to agree 100% to the sale?
What happens if they don't?
What would be the strategy if they didn't (though the Property Investor assumes they would)?
Selling would not be of benefit to the management company however, what is their involvement with the selling process?
If the owners are not happy with the management company, is there any recourse, or are they stuck with the people who own (if thats the correct word) the management rights? We assume this would be the problem faced by others such as retiree complex owners and other strata titled hotels or complexes under management agreements.
The Property Investor is now exploring the possibility of a new lease with the management company and the terms but has yet to approach a commercial property solicitor
The Property Investor considers this a bottom draw stock- hasn’t had great capital growth, hasn’t had great cashflow but believes that it is a bottom drawer stock and redevelopment and reward is a given for the future
Not sure whether to post here or in the legal
Chasing your thoughts on this situation and hopefully some insight into the pro’s and con’s
A Property Investor has a commercial lease on two units (both under 50 sqm) in a short term holiday complex. Their lease is to the management company and has been in place since late 2000 and the units were purchased for $120,000.00 each, so $240,000.00 in total. The rest of the properties (70 units) in the complex are short term rentals owned by various investors.
Rent for the Property Investor has not increased in the last 10 years despite rental reviews (the management company gets someone to review the rent as does the Property Investor, this has always resulted in no increase over the years) and costs have been ongoing for repairs of which they are a party to as unit owners, with the sinking fund now at low levels. Rents for the units in the complex have increased over time- however payments have not due to ongoing costs.
The carrot at the end of the stick is redevelopment opportunity and the value of the land, due to its prime location - as many older holiday rental complexes nearby have been redeveloped.
The commercial lease is due for renewal soon so the Property Investor is looking for a local solicitor to draw up a new lease, having had enough of the old one.
The properties have increased in value from $120,000.00 each to approximately $280,000.00 each over the 10 years based on comparative market sales. Accessing the equity is an ongoing problem as the units are under 50 sqm and has previously only been allowed at 50-60% LVR which in past years has not been worthwhile
The Carrot
If the property was sold to a developer in the near future and that’s a big IF - due to the tightening of credit in recent Financial Crisis years, but selling for big dollars to a developer is the end goal.
Do all owners have to agree 100% to the sale?
What happens if they don't?
What would be the strategy if they didn't (though the Property Investor assumes they would)?
Selling would not be of benefit to the management company however, what is their involvement with the selling process?
If the owners are not happy with the management company, is there any recourse, or are they stuck with the people who own (if thats the correct word) the management rights? We assume this would be the problem faced by others such as retiree complex owners and other strata titled hotels or complexes under management agreements.
The Property Investor is now exploring the possibility of a new lease with the management company and the terms but has yet to approach a commercial property solicitor
The Property Investor considers this a bottom draw stock- hasn’t had great capital growth, hasn’t had great cashflow but believes that it is a bottom drawer stock and redevelopment and reward is a given for the future
