One good commercial property – minimum 10L investment with 7% plus rental returns
Friends – Purva Gainz, in Hosur road, Bangalore has ground plus eight floors with three MNC’s as it’s tenants (Trelleborg, Home Credit and Envision Financial systems). The property is well connected by Hosur road and is close to the NICE road junction near Electronic city. It is about 400 meters away from the upcoming Hosa road Metro station (expected in late 2022).
The investment opportunity is the 8th floor of the building – measuring appx 29,000 sq ft. It is leased to a subsidiary of Trelleborg (Sweden) – which is a century old Swedish company and has three manufacturing facilities in Karnataka including one right next door to Purva Gainz. The lease started in June 2015 and was renewed in 2018 with a 3 year lock in and an additional option of 3 years (till June 2024) with 5% increase in rentals per annum.
The purchase price per sq ft is Rs. 6800 and when you add the legal /brokerage/management charges – it comes to Rs 7443 per sq ft. The net rent (after management fees) currently is Rs 522 per sq ft per year which results in a yield of 7%. As the agreement has a 5% rental increase every year during the lease term, the rental yield in year 5 would be 8.74%.
My survey of the purchase price of this property and the rents in this area tells me that the price is right and the rental returns are reasonable.
I like this transaction as the property is a well-known property, the location is very good, the rent increase of 5% means that the property price will surely appreciate by 5% per annum plus there will be an additional value increase due to the metro station. So, if you add this 5% value appreciation to the 8% rental yield – we get a 13% ROI.
This investment is coming with a 20L ticket size – however for the first 20 investors from my website, the company front ending this deal has offered a ticket size of 10L as special case.
This transaction is being done through a SPV route, where the investors will own shares in the SPV company proportional to their investment.
In case you are interested – please write to me at rajasekharan.sg@gmail.com and I will send you more details and also connect you to the company which is front ending this transaction.
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