**Live Examples** - Commercial Lease Doc Product - Investment Finance Analysis | CRE Finance
- Tim Allen
- May 25, 2022
- 2 min read
Updated: May 30, 2022
The lease doc finance option offered by some banks is a short format approval process where income verification and debt servicing is performed on the basis of the lease only.
This is opposed to a typical full doc approval process which requires not only upfront bank review of lease but personal & company tax returns, financials, BAS, the list goes on. Plus re-presentation of these items on an annual basis.
Lease doc is often the preference as is the lower maintenance option over the loan term.
Financing of the below 4 live market examples is illustrated in the table below.
Property 1 - 385 High St, Prahran, Vic
Period building with heritage appeal in limited supply
Securely leased to café operator Fourth Chapter Prahran Pty Ltd
Prominent location adjoining Victoria Gardens
Private sale campaign - c. $2,800,000 (c. 3.5% gross yield)
Annual 4% rent increases
https://www.realcommercial.com.au/for-sale/property-385-high-street-prahran-vic-3181-504024383
Property 2 - Ground / 424 New St Brighton, Vic
Modern cafe retail space in affluent location
Long lease expiry with options to 2049
Private sale campaign c. $2,175,00 (c. 4.8% gross yield)
Property 3 - 1&2 / 42-46 Vella Drive, Sunshine West, Vic
1025 SQM factory warehouse with office
Secure tenancy to manufacturer of cool room and insulated panels
Lease expiry November 2026 with options to 2031
Non-specialised property with myriad of potential users
Private sale campaign c. $1,900,000 (c. 4.6% gross yield)
Property 4 - 204 Toorak Rd South Yarra Vic
200 SQM strata office in affluent Melbourne suburb.
Secured lease to commercial construction company Erilyan (featured in Block TV series)
5 year term with options
Private sale campaign asking c. $1,525,000 (c. 5.2% gross yield)
https://www.realcommercial.com.au/for-sale/property-204-toorak-road-south-yarra-vic-3141-503929234
Lease doc financing investment analysis.
Notes to above table and other considerations
Long term capital growth would be expected from all properties however not factored into analysis
Cash equity requirement excludes bank and other government fees
Company / trust borrower - typically a new entity if preferred
Bank LVR max 65% , Non- bank 75% (albeit higher rates)
Minimum Interest Cover Ratio (ICR) 165%
The interest rate based on average rate 3.5% some banks offer below this, some above
Banks will generally require third party valuation report
Financing is based on 3rd party lease, owner occupied commercial finance is separate pathway.
Analysis all pre-tax environment
Assumptions as at 25/5/2022
Not considered investment advice and all subject to application, clear credit and ATO.
Tim Allen - Director
Commercial Real Estate Finance Pty Ltd
0422043443
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