We've been approached to build a new childcare centre on some freehold land we already own on the edge of the city. The net yield based upon the proposed construction cost (inc full use of the contingency fund) is 9%, while the ground-lease proportion was calculated at 5.5% subsequent to third party advice. The tenants are responsible for all opex.
In terms of a return for a new build with a 15 year lease with a 10 year ROR and rent reviews every 3 years, do you think that broadly stacks up?
Looking at similar newly built centres, based on the asking price yields at sale are around 6%. Presumably they're receiving a few percentage points above that during the initial period of ownership.
In terms of a return for a new build with a 15 year lease with a 10 year ROR and rent reviews every 3 years, do you think that broadly stacks up?
Looking at similar newly built centres, based on the asking price yields at sale are around 6%. Presumably they're receiving a few percentage points above that during the initial period of ownership.
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