Existing Strip Retail Commercial Building – 1300m2 (approx.) Over 4 titles. Renovation and Reposition

Purchased for $1.9M in 2004 at a time when the residential market was rocking but commercial locally hadn’t achieved the same exalted status though good quality property with strong tenants and attractive yields were still moving.
It’s for this reason that this property had been on the market for some time and not sold. The site consisted of 3 titles of land with a 3-street frontage, there was a 1000m2 commercial structure built on the prime road frontage some 20 years prior. A 1960’s residential home was built behind it facing the side street and a two-storey duplex (both separately titled) built on the back-street frontage. 

Overall, all buildings were tired and needed some love at best and renovation at worst. There were two vacancies in the commercial building and overall the site returned about 6% net when the market of the time was demanding 8-9%. I saw it differently, however, and ran the maths. 

Though 70% occupied the commercial rents were under the current market even, allowing for the vacancy, the residential house and duplex sat on commercially zoned land and if rented as such the income would increase 2-2.5 times. 

Overall, this suggested a possible net return of 12-13%. The improvements and re-leasing took some time and like most projects of this type, never ran in a straight line, but always remained cashflow positive and was sold in 2015 for $4,200,000 providing a capital return of xx% before annual income. 

The equity created by this project during ownership also provided the capital to pursue other opportunities though they were not always as successful as ‘The Bank of Aerodrome’.