Commercial Property
Discussion
So lots of businesses with magnificent steel and glass temples to consumerism are going to the wall. Now as I understood it most of the buildings have been sold off and leased back years ago.
I should imagine renting out these new vacant sites is a little challenging at the moment (surely there is a finite number of Tesco Metros that can be supported). So at what point do commercial landlords start agreeing with ginger Mancunians about economics?
I should imagine renting out these new vacant sites is a little challenging at the moment (surely there is a finite number of Tesco Metros that can be supported). So at what point do commercial landlords start agreeing with ginger Mancunians about economics?
I have never really understood why any company would do a sale and leaseback. After all historically the capital sum received as around 10 o 15 times the annual rent, and the rent reviews had minimum increases.
All the tenant gained was a capital sum (used to pay advisers or executives bonueses?) whilst in 15 years all the cash from the sale was spent and they were then paying high rents. In fact that is what has gone wrong in a number of cases.
Yes Landlords are finding shops difficult to let, but in many cases the rental stream is guaranteed by somone else, even if the shop is empty, so do they care?
All the tenant gained was a capital sum (used to pay advisers or executives bonueses?) whilst in 15 years all the cash from the sale was spent and they were then paying high rents. In fact that is what has gone wrong in a number of cases.
Yes Landlords are finding shops difficult to let, but in many cases the rental stream is guaranteed by somone else, even if the shop is empty, so do they care?
Most of the huge glass temples you speak of are owned by investment companies - ie. your pension funds etc. They are leased out to the tenants on long term leases, often 25 years or more. If the Tenants get into difficulty then they can be stuck in a building too big for their needs and if they finally collapse then it is ultimately your pension fund that suffers.
williamp said:
yes, because the rental stream is no longer guauat=nteed, and this government recently introdjuced an empty rates tax which had good intentionbs but is makingi it very tough for some landlords to stay afloat. Its cheapre in some cases to demolish a building then keep it empty.
Ah yes that was a stunning piece of work by the government, who used a sledgehammer to crack a nut. Yes some landlords (or rather at least 1 large industrial landlord)do keep properties empty because they can't let it at the price they think it is worth, but more landlords can't let property as it is old, needs refurbishing, there is a surplus of supply, they are creating a redevelopment site etc and they are suffering.There are some imaginitative avoidance schemes around at present though!
Chrisgr31 said:
I have never really understood why any company would do a sale and leaseback. After all historically the capital sum received as around 10 o 15 times the annual rent, and the rent reviews had minimum increases.
All the tenant gained was a capital sum (used to pay advisers or executives bonueses?) whilst in 15 years all the cash from the sale was spent and they were then paying high rents. In fact that is what has gone wrong in a number of cases.
Yes Landlords are finding shops difficult to let, but in many cases the rental stream is guaranteed by somone else, even if the shop is empty, so do they care?
+1 Did HMG under Labour's Blair not do this with HMR&C (formerly Customs & Excise) buildings?All the tenant gained was a capital sum (used to pay advisers or executives bonueses?) whilst in 15 years all the cash from the sale was spent and they were then paying high rents. In fact that is what has gone wrong in a number of cases.
Yes Landlords are finding shops difficult to let, but in many cases the rental stream is guaranteed by somone else, even if the shop is empty, so do they care?
Dick Dastardly said:
Wings said:
+1 Did HMG under Labour's Blair not do this with HMR&C (formerly Customs & Excise) buildings?
A company called Mapeley bought them all. Huge deal at the time.However HMRC is very busy closing offices now and Mapeley is in deep doo doo..
Deva Link said:
Dick Dastardly said:
Wings said:
+1 Did HMG under Labour's Blair not do this with HMR&C (formerly Customs & Excise) buildings?
A company called Mapeley bought them all. Huge deal at the time.However HMRC is very busy closing offices now and Mapeley is in deep doo doo..
Many government buildings are tired and do not meet the standards todays tenants expect, mind you some of the new government offices are top quality, so not sure the older ones meet thier own standards!
My guess is if Mapeley are deep in the dooh daah thats because the cash value has already been extracted from the company.
That is of course what has happened to many companies, including Woolworths and I think MFI. The freeholds were sold, significant rents often with minimum rent reviews agreed, the cash has been spent (and given out in bonuses and dividends) and now they cant pay the rent.
Could eventually happen to the supermarkets! I suspect car dealers are going to be in great trouble, many pay very high rents, effectively subsidised by the manufacturer if they hit their targets. Well they are not going to be hitting targets at the moment!
deeps said:
Slightly off topic, but does anyone know the current value of commercial/industrial land, in the south west?
The most recent figure I can find is from 1/1/08 which states Exeter as average 850k/hectare.
Any knowledge as to current value? I guess maybe halved?
Almost impossible to say, I'm afraid. Value will depend on its location, how its serviced, whether it has any planning permissions (and what they are), size and, of course demand. There is a lot of land throughout the UK which has been land-banked over the last 10 years, so demand might not be what it once was- usually developers would buy the land, but they are struggling with cashflow at the moment.The most recent figure I can find is from 1/1/08 which states Exeter as average 850k/hectare.
Any knowledge as to current value? I guess maybe halved?
Chrisgr31 said:
Deva Link said:
Dick Dastardly said:
Wings said:
+1 Did HMG under Labour's Blair not do this with HMR&C (formerly Customs & Excise) buildings?
A company called Mapeley bought them all. Huge deal at the time.However HMRC is very busy closing offices now and Mapeley is in deep doo doo..
http://www.guardian.co.uk/politics/2008/dec/11/map...
It's a bit like my old company where we were given what seemed like generouse incentives to give up company cars - turned out the plan was to restructure and make many people redundant and the company didn't want to be stuck with scores of cars.
We have the same problem here in the U.S.
There was a chain of stores called Mervyn's (mostly clothing and such) that was owned by Target. Target sold it to a private equity firm which to milk it of money sold all of its prized real estate and leased back to raise cash to improve operations, or so they said, but they ended up leasing the properties at close to two times what they were paying before. The private equity walked away with the cash, the stores are closing, and thousands will be left jobless.
There was a chain of stores called Mervyn's (mostly clothing and such) that was owned by Target. Target sold it to a private equity firm which to milk it of money sold all of its prized real estate and leased back to raise cash to improve operations, or so they said, but they ended up leasing the properties at close to two times what they were paying before. The private equity walked away with the cash, the stores are closing, and thousands will be left jobless.
mr_spock said:
I'm looking at renting a shop, landlords don't seem to be willing to deal. I guess they're not hurting that much yet.
Depends on what your idea of a deal is. If you want them to cut 30%, it likely won't happen. Your best bet is to work off of current leased rates, not asking rates, and not what you think is a good deal, but what the market thinks it is. Big difference.
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