Valuation based on rental income stream

M

money man

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I know it is difficult to calculate but i know so valuers / auctioneers will value a property based on its future income stream/tenant etc... Can anybody give me a rough (very i know!) guide of what a commercial property would be worth valued on this basis with a rental income of 400k . 20 years to go with a blue chip tenant. Usual FRI lease with regular rent reviews.
 
Where is it?

A property with an annual rent of 400K on Grafton St is worth far more than a premises in the back of beyond with an annual rent of 400K.
 
Roughly low 8 figures.
I'd say 10 mill. based on a yield of 4%.
 
A) I dont think there are many commercial properties in the back of beyond rented for 400k per annum
B) Most business sections/property sections refer to recent deals for commercial properties be they banks on sale and lease back etc at yields from 2.7% to 5.5% roughly speaking. I was just looking for a very crude medium or what people perceive it to be. I would assume due to the nature of tenant (government) that it is more likely to be at the lower end of the scale.
 
Well, a yield range of 2.7% to 5.5% is a factor of two so gives a fairly wide range of value!

I'm an EA and do these valuations, but I'd need to know where the property is - not the exact town - a similar size town or area wouls suit.
 
money man said:
AI would assume due to the nature of tenant (government) that it is more likely to be at the lower end of the scale.
Click to expand...

In my ignorance, I would have thought a government tenant would be a big plus. Little to no risk of default on the lease.
 
"at the lower end of the scale" in terms of yield, does reflect a lower risk. i.e. a 2% yield means a 50 year payback for the property - very secure tenant or location, whereas a 5% yield means a 20 year payback - more risky.
 
Lobby said:
"at the lower end of the scale" in terms of yield, does reflect a lower risk.
Click to expand...

Sorry. Got hold of the wrong end of the stick. I thought it was being suggested that a government tenant would give rise to a lower property valuation. I see the opposite point was being made.
 
Just read today that some crowd (Can't remember who - could have been Royal Liver) sold off some of their smaller commercial properties around the grafton street area.
(included Gotham cafe and pady powers).
They sold them at a avlaue which suggested a 2% yield.

For anyone that is interested,Gotham cafe currently pay €190k a year in rent.
 
Property yields at this level will soon become intuitively the most stupid piece of finanicial analysis ever done ! At its heart it requires a Terminal Value to support the entire rationale ie why accept a yeild with more risk than that returned by Bonds (Treasury). Or another way is an implied Capital Gain (significant one)..
I feel the gentle prick of a bubble about to presssssss......................
 
ya...2% is small alright.
it was ijn the commercial supplement of todays indo.,
 
I understand the most expensive per sqm is the Butlers Chocolates at the top of Grafton St.
 
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