CASE STUDY
A $9m Office Acquisition in Western Brisbane
Buying more building than you need is only a mistake if the balance sits empty. Here the other tenancies fund the ownership.
DEAL SNAPSHOT
The numbers.
ASSET CLASS
Office
CLIENT
National not-for-profit expanding its property holdings
LOCATION
Western Brisbane, QLD
PRICE
Circa $9m
YIELD
OWNER OCCUPIER
LEASE
Multi-tenanted building, one floor occupied by the organisation, balance leased
CASE NOTES
The full story.
The Brief
A national not-for-profit expanding its real estate holdings, seeking a property to occupy where the adjoining tenancies would generate income.
This is a more sophisticated brief than a straight owner-occupier mandate, and it changes the shape of the search considerably. The building has to work as premises and as an investment simultaneously, and those two requirements do not automatically point at the same asset.
Buy What You Need, or Buy the Building
The instinctive approach to an owner-occupier purchase is to buy only the space required. It feels disciplined. Capital is not tied up in floor area the organisation does not use, and the acquisition is smaller and simpler to fund.
It also caps the outcome. An organisation occupying the whole of a small building carries every cost of ownership itself and has nowhere to grow into. An organisation occupying part of a larger building has other tenants contributing to the holding cost and physical room to expand into as it grows.
The reason most buyers do not do this is that a multi-tenanted building requires two separate assessments. You are underwriting your own premises requirement and, at the same time, underwriting an investment: covenant quality of the other tenancies, expiry profile, market rents against passing rents, and the depth of leasing demand for those floors if a tenant leaves.
How We Approached It
We assessed the occupancy requirement first — floor plate, configuration, access, staff catchment and location relative to the organisation’s service footprint — because a building that fails as premises is not rescued by its income.
The income side was then underwritten on its own merits, on the assumption that the organisation might one day occupy more of the building or none of it. Both scenarios needed to work.
And, as with any first-time landlord, we were direct about what ownership introduces: property management, capital expenditure planning, and vacancy risk carried by an organisation whose expertise lies elsewhere. That is a governance question as much as a financial one, and it belongs in the board paper rather than in the first year of ownership.
The Outcome
A multi-tenanted office building in western Brisbane acquired at circa $9m. The organisation occupies one floor, the balance is leased to other tenants, and the income from those tenancies contributes to the cost of holding the asset.
As the organisation grows, the building grows with it.
THE VANTA LENS
How we read it.
Buying more building than you need is only a mistake if the balance sits empty. Occupied by other tenants, the surplus floors move from being a cost the organisation carries to being income that funds the holding — and expansion space that requires no relocation. The reason it is uncommon is that it demands two underwrites rather than one: the premises must work on its own terms, and the investment must work even if the organisation never occupies another square metre. It also makes the buyer a landlord, with the management, capex and vacancy risk that follows. That belongs in the board paper, not in the first year of ownership.