Raising the Roof on Rents!
To refurb or not? That’s a question on the minds of many clients, and Viranda is well versed at removing the guesswork. We have completed many successful reinvestment projects, but today we focus on a client who has a commercial building in Allright Place, Mt Wellington. A comprehensive refurbishment has breathed new life and prosperity into this once run-down address.
Our client is a Charitable Trust who relies on the property income to carry out its activities. For more than 20 years, a heavy vehicle mechanic had occupied the building and the premises reflected years of hard industrial use. The roof needed replacing and the overall aesthetic was very unappealing.
A minor refurbishment had recently been completed, which highlighted how even a small improvement could raise the value of a building and attract a higher value, more stable tenant. However, we had to tread carefully. Long-term goodwill between the former tenant and landlord meant rental returns were artificially low. Yet the tenant was unable to commit to a lease period beyond a month, and certainly couldn’t wear a rent increase.
Viranda reviewed the property against current market conditions and identified opportunities for a significant uplift in both capital and rental value, along with the added security of a longer-term lease. Confident in our ability to secure favourable lease conditions and a high-quality tenant, our client agreed to the refurbishment. We also gave our assurances to sensitively balance the relationship (and end of lease) between the former tenant and landlord, which all took place in a positive manner.
Our refurbishment plan centred around maximum returns without overcapitalising. Within this period of planning and tender of works, Asbestos was identified, and a successful removal plan followed. Project management of the works was carried out with regular communication and strict adherence to the client’s budget, along with following all Health & Safety requirements.
During the period of works, Viranda marketed the property, reviewed potential tenants and negotiated a lease agreement to suit all parties. In taking this approach, costly vacancy periods were minimised.
Overall, the project resulted in a dramatic increase in rent, enabling a payback period of less than five years. Capital value increase on the asset was significantly higher than the investment to carry out the works, and should the current tenant vacate; the refurbishment exercise has resulted in a building that would prove highly appealing to alternative occupants (without further expenditure).
Ongoing property management continues to be smooth sailing!