Advice sought on making offer on industrial units
Discussion
A property management company I know of are away to put at least 7-8 units all in close proximity to each other on the market on behalf of a client. The units are 1,200 to 3,000 sq ft. I've got a price on one particular unit from the company doing the surveying and the asking price is £35 sq ft. Normal valuation on these units would be £25-35 according to another contact of mine who knows their stuff.
Now, the interesting part. The company that actually owns the properties has been in administration for some years. 2 of the units are let but the rest are vacant (technically one is still let till February but the tenant has moved out and this is in the unit which will be most expensive to rent and pay rates on). 2 of the units which are vacant are full of old junk, probably need a bit of work doing and have been vacant for a number of years. 1 of the units which has been let out was vacant for around 5+ years until this year.
The properties are solid enough. Built in the 70's with asbestos-concrete roofing, they're not much to look at but an alright place to situate a business.
There's 3 properties I'm considering putting offers in on before they go to market. 1 is let and the other 2 are the ones mentioned above that have been vacant for a while and need work.
I've been giving this some thought and I don't see anybody paying much money for a portfolio of properties where 25% of them are currently let out and the last few years rate is at best 40%. To cut to the chase, I was wondering if anybody with experience in buying industrial units or similar could give me some advice on whether a low-ball offer would work?
Now, the interesting part. The company that actually owns the properties has been in administration for some years. 2 of the units are let but the rest are vacant (technically one is still let till February but the tenant has moved out and this is in the unit which will be most expensive to rent and pay rates on). 2 of the units which are vacant are full of old junk, probably need a bit of work doing and have been vacant for a number of years. 1 of the units which has been let out was vacant for around 5+ years until this year.
The properties are solid enough. Built in the 70's with asbestos-concrete roofing, they're not much to look at but an alright place to situate a business.
There's 3 properties I'm considering putting offers in on before they go to market. 1 is let and the other 2 are the ones mentioned above that have been vacant for a while and need work.
I've been giving this some thought and I don't see anybody paying much money for a portfolio of properties where 25% of them are currently let out and the last few years rate is at best 40%. To cut to the chase, I was wondering if anybody with experience in buying industrial units or similar could give me some advice on whether a low-ball offer would work?
Jockman said:
Fifteen years ago we bought our Commercial Unit. It was up for £705k and we offered £350k. We settled on £450k as the large multinational owner needed it off the books before the tax year end.
No harm in being a bit cheeky.
Remember Stamp Duty and fees.
Any money in your SIPP to buy them?
no SIPP at all. No harm in being a bit cheeky.
Remember Stamp Duty and fees.
Any money in your SIPP to buy them?
ETA- just for clarity, I'm 28 and have no pension.
Edited by ModernAndy on Tuesday 22 November 19:52
insurance_jon said:
I wouldn't chase. From experience in what my clients are buying those type of units can go down to around 10-15 psqft.
Probably won't go to auction, they will just sit for sale for a while.
I personally would get a surveyor to advise you. They will save more than they cost.
FYI - I bought my offices from the administrators at £240k via a surveyor, they were up at £450k
Cost for surveyor 1%finders fee inc survey
£10 sq ft would certainly make it doable. Even if that's only on the 2 vacant units. Probably won't go to auction, they will just sit for sale for a while.
I personally would get a surveyor to advise you. They will save more than they cost.
FYI - I bought my offices from the administrators at £240k via a surveyor, they were up at £450k
Cost for surveyor 1%finders fee inc survey
I had a word with the surveyor's/property consultant's agent who is being tasked with getting the units sold earlier today. It sounds like they are going to put the properties to market if they can't get close to £30 sq ft for unoccupied units and £35 sq ft for occupied units. I think it's time for me to speak to a surveyor. Would they go under a different guise such as 'commercial property consultant'?
ETA- is a statement of reasoning for an offer which would otherwise be considered low a good idea?
ETA- is a statement of reasoning for an offer which would otherwise be considered low a good idea?
Edited by ModernAndy on Wednesday 23 November 13:00
XMT said:
From what you have said I would be cheeky and offer half the rate.
As another poster has mentioned it has happened in the past.
A friend was an MD of a company local to be, they were winding down UK operations and wanted rid of the building. THey have it advertised for 600k and someone made an offer of 300k.
They agreed on 350k. It was 30,000 sq ft warehouse with 25% built as office. It was a lovely lovely building.
The surveyor has expressly told me that such an offer would be declined but I'm not one to give up that easily.As another poster has mentioned it has happened in the past.
A friend was an MD of a company local to be, they were winding down UK operations and wanted rid of the building. THey have it advertised for 600k and someone made an offer of 300k.
They agreed on 350k. It was 30,000 sq ft warehouse with 25% built as office. It was a lovely lovely building.
The thing I'd emphasise about this is that the units are all on 1 small street and have had an exceptionally low occupancy rate. There's also plenty of units in the surrounding areas for let. It would be an awful lot of work and money to get them all filled and all the while they're costing the owner in rates.
Update time.
I've spent a lot of time researching the company that owns the buildings. I managed to get the administration paperwork and this is replete with information. The administrator's aim is to realise the value of the properties. The property owners owe millions to one particular bank that is now part of a well known finance company named after a Close pair of Brothers. This is the only creditor who will end up getting paid out of the administration (and that's in writing). Interestingly, at the present moment the administrators have less than 2 weeks left before they need to extend the period of administration (again) and they only extended it by 3 months last time where the period of administration beforehand was nearly 2 years. I'm not sure if I'm looking too far into this fact but I wonder if there's pressure from the preferential creditor.
There's around £200k in the company account right now (they seem to only be losing a few thousand a month currently- it was around £260k a year before) so I can't see the administrators being desperate for money at the present moment. Again, perhaps pressure from the bank?
A rather nice 5,500 sq ft unit just down the road from us was sold last year for £125k so that's only £22+VAT sq ft. It was also sold to the company operating out of the premises immediately next door to that unit so in my opinion at least, that was a transaction done very much in the seller's favour. I'm not sure if inverse quantum (i.e. the price per sq ft being less for larger properties) would have much of a bearing on that price but I would hope to use this price to negotiate on the units that have been empty for a number of years.
I'm going to register my interest in the property with the property agent very soon.
Anything I should look out for that's a sign that the administrator will do a fire-sale on the properties?
I've spent a lot of time researching the company that owns the buildings. I managed to get the administration paperwork and this is replete with information. The administrator's aim is to realise the value of the properties. The property owners owe millions to one particular bank that is now part of a well known finance company named after a Close pair of Brothers. This is the only creditor who will end up getting paid out of the administration (and that's in writing). Interestingly, at the present moment the administrators have less than 2 weeks left before they need to extend the period of administration (again) and they only extended it by 3 months last time where the period of administration beforehand was nearly 2 years. I'm not sure if I'm looking too far into this fact but I wonder if there's pressure from the preferential creditor.
There's around £200k in the company account right now (they seem to only be losing a few thousand a month currently- it was around £260k a year before) so I can't see the administrators being desperate for money at the present moment. Again, perhaps pressure from the bank?
A rather nice 5,500 sq ft unit just down the road from us was sold last year for £125k so that's only £22+VAT sq ft. It was also sold to the company operating out of the premises immediately next door to that unit so in my opinion at least, that was a transaction done very much in the seller's favour. I'm not sure if inverse quantum (i.e. the price per sq ft being less for larger properties) would have much of a bearing on that price but I would hope to use this price to negotiate on the units that have been empty for a number of years.
I'm going to register my interest in the property with the property agent very soon.
Anything I should look out for that's a sign that the administrator will do a fire-sale on the properties?
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