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Fair price for a commercial property

  • 15-10-2012 12:43pm
    #1
    kevster1977
    Registered Users, Registered Users 2 Posts: 6 ✭


    I have recently been approached by the bank to buy the property I currently rent and run my business from. I took on the lease in 2008 and have 6 yrs to run on it. I pay a colossal rent on the property of €2000 per calendar mth. The lease has an all repairing clause in it and I have already had to pump loads of my own money into the building. There is also an upwardly only rent review clause in place after year 5.
    The owner is in financial difficulty with sustantial owings to the bank and they are looking to sell of the property quickly. The bank instructed their own valuation which came in at €150,000. I felt this was a ridiculous price to pay and so instructed two independent agents to do a valuation. Both these came in at a more realistic €75,000 with both agents suggesting I should maybe offer a little more as a special interest purchaser to secure the premises. I also instructed a survey report on the building and it showed that over the next 5-10 yrs the building will need €20,000 worth of repairs.
    I initially offered €80,000 which has been declined and then went to €85,00 and finally €90,000. The bank wont budge of €100,000 at this stage. They said they had it revalued by another agent (who didnt even come out to view the building) and they can expect to acheive €100,000 on the open market. They feel confident they will secure an offer given the high rent I pay and the potential return that this would give an investor. Other agents say they are bluffing and such a deal would be extremely risky for an investor. They feel the only person to ever be likely to be interested in buying the building is me.
    I am reluctant to pay too high a price for this building. The price of €90,000 is some 15K over market value already so Im reluctant to go any higher. The bank have cited that given the rent I pay they can expect to get €140-150,000 anyway from me over 6 yrs and that even at €100,000 I will still be saving but I dont think this is a basis for them to be selling the building to me as a heavily inflated price. They seeem to be intent on squeezing every last cent of me to recoup for the risky borrowings that they sanctioned to my landlord.
    My dilemma is should I hold out at €90,000 and tell them to stick their €100,000 or should I pay it. I would be really concerned that my lease traps me for 6 yrs and I could pay a lot more than €100,000 in rent over the 6 yrs and be left with nothing at the end.
    I would be grateful for any advice.


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