What is 'specialised' commercial property?

With most of eastern seaboard still in lock down we at Commercial Real Estate Finance Pty Ltd are certainly encouraged by the support our panel big bank and non-banks are showing clients who are actively pursuing commercial property assets and development projects.

Fierce competition on auction day for traditional income producing properties is leading some of my clients to consider specialised commercial assets.

Specialised assets by definition have generally been constructed for a specific use, and as a result are generally viewed by financers as being higher risk than non-specialised property with a variety of uses.

Common types we have experience with include childcare, retirement& aged care, car wash, commercial swim school, hotel/motel/holiday parks, service stations and infrastructure ground leases.

Things to consider when reviewing freehold investment into these types of assets;

• Financial strength of the operator and or covenant from parent company

• Supply and demand for the underlying product or service in the area.

• The high gross yields could be a trade off for limited capital growth potential or high maintenance costs.

We often find divergent lending policy and commercial terms between the lenders when it comes to specialised assets.

• Generally you can expect lower LVR than non-specialised property especially in regional and sub-regional location.

In summary if structured correctly specialised commercial assets can provide solid free cash flow and ROE coupled with long lease expiries of up to 30-40 years!!

Please reach out with any questions or comments.

tim@crefinance.com.au

0422043443

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