CASE STUDY
A $4.5m Acquisition for a Family Office
A 5.5% net yield looks thin next to the headline numbers available elsewhere. The yield was never the point of this acquisition.
DEAL SNAPSHOT
The numbers.
ASSET CLASS
Medical / Allied Health
CLIENT
Small family office
LOCATION
Western Adelaide, SA
PRICE
Circa $4.5m
YIELD
5.5% net
LEASE
Multi-tenanted, anchored by a longstanding general practice alongside allied health tenancies
CASE NOTES
The full story.
The Brief
A small family office looking to deploy capital into healthcare property. The mandate was long hold, income-first, low management intensity, and a preference for tenant diversity over a single large covenant.
The Case Against the Deal, First
It is worth stating the objection plainly, because it is the one every buyer raises. Circa 5.5% net is a tight yield. There were assets available at the same price point offering meaningfully more income.
Those assets were secondary locations, single tenants, thinner covenants, or all three. Yield is compensation for risk. A higher number is not a better outcome — it is the market telling you what it thinks of the asset.
What Made This One Work
Three things, none of which appear in the yield.
Tenant diversification. A single-tenant medical asset concentrates the entire income in one covenant and one expiry. This building spreads it — a longstanding general practice as the anchor, with allied health tenancies around it. Allied health clusters around GPs for referral reasons, which makes the tenancy mix self-reinforcing rather than incidental. One departure is a leasing exercise, not an income event.
The land. A significant corner site on a main road, with a planning framework permitting up to six levels. We want to be careful here: we did not pay for the development potential and we did not underwrite it. Optionality you pay for is a liability. Optionality that comes free with a well-located corner site is the reason to prefer that site over an equivalent income stream on a lesser one.
South Australia’s stamp duty position. SA has abolished stamp duty on qualifying commercial property. On an acquisition of this size in most eastern states, transfer duty is a material six-figure cost that comes straight off the buyer’s return and is never recovered. Removing it changes the effective entry price, and it is the single most underweighted factor in how interstate buyers compare markets.
The Outcome
A multi-tenanted healthcare asset on a main road corner site, acquired at circa $4.5m on a circa 5.5% net yield, with diversified income and a land holding that will outlast every lease in the building.
THE VANTA LENS
How we read it.
The quoted yield is the least informative number in a multi-tenanted healthcare acquisition. Diversified income across a GP anchor and its allied health cluster does not behave like a single covenant at the same yield, and it should not be priced as though it does. The six levels of development potential are optionality we deliberately did not pay for — but they come attached to a main road corner site, and that site is what still has value when every current lease has expired. Buy the income. Let the land do the rest.