Auction Case Study of 1-5 Cross Street and 6-8 Scott Street, Pyrmont
Sale date: 9 April 2020
Versatile collection of terraces with construction dating back to the late 1800’s. In its present state the property is configured as a single storey commercial office and an attached one bedroom cottage.
The property is of local and state heritage significance and accordingly the buyer pool was limited due to perceived difficulties to update or reposition the asset. The property was leased for 12 months to a charity on a concessional rent of $13,000 per annum gross. The statutory outgoings alone equated to >$40,000 per annum and as such the cashflow in the first year was negative. In addition, there were concerns that the tenant was a ‘statutory tenant’ who would be difficult to vacate upon expiry given the history of the property (it formed part of the squatters movement of the 1970’s-1980’s).
The market gross rent was considered to be $90,000 to $120,000 per annum gross, or $50,000-$80,000 per annum net. The yield was going to be exceptionally tight.
In addition to this, after 7 days on the market COVID-19 started impacting Australia. This included the government initiative to prohibit auctions and group inspections, not to mention economic ramifications. Throughout the final three weeks of the campaign the tenant allowed access only once.
The Vendor (Property NSW) had a mandate to sell, and Colliers knew they had the expertise to continue with the sales campaign.
Colliers quickly engaged a videographer to film the property for an affordable price of $320 + GST. This 4 minute video captured the whole property and included emotive music to engage the buyers. One on one private inspections of the exterior only continued as the tenant did not permit internal inspections.
The Auction campaign was shifted to an ‘online auction’ where the agents gave one on one tutorials on how to register. This gave added control to the agents as they understood who the genuine parties were.
Consistent feedback was provided to the Vendors and the agents worked with the resources available. There was no delay to the campaign timeline.
Multiple requests for changes to contract were fielded in the 48 hours prior to auction. Colliers assisted with these enquiries and continued in the assistance of registering buyers.
On the day 17 buyers registered for the auction. Of these 17 buyers, 9 were of Asian descent. There were 56 online viewers.
This resulted in a highly competitive auction campaign attracting 25 unconditional bids. The property sold for $2,900,000 which was $630,000 (27.75%) above reserve. There were no changes to the contract of sale, and the contract was executed on a 10% deposit and 42 day settlement.
The successful buyer was introduced by the Colliers Asian Markets Team. This buyer was not otherwise aware of the opportunity.