Newmarket property offers secure income

Interior view of office area within the warehouse styled office building at 20 Morgan St. Photo / Supplied

A freehold, warehouse-style office building with two residential apartments at 20 Morgan St in Newmarket is being offered for sale at auction following extensive re-development.

Peter Kermode and John Davies of Colliers International are marketing the building, in an up-and-coming retail and commercial pocket between Carlton Gore Rd and the Domain.

The two-storey, 608sq m building on a 620sq m site with seven carparks is due to go under the hammer on October 26. Initially constructed in the 1960s and extended in the 1980s, its substantial redevelopment includes a new roof and air-conditioning system, as well as a comprehensive internal refit of the office areas. Anchor tenant Dissero Brands, a brand licensing firm, occupies the entire ground floor and part of the first floor. The company pays $146,172 a year in net rent on a new six-year lease with rights of renewal. One two-bedroom and one three-bedroom apartment, both tenanted, make up the remainder of the first floor and generate a further $44,980 in annual rent.

Rent reviews to market on the commercial lease and a "soft ratchet" to the current rental of $260 per square metre, which prevents the rent from falling below this level, provide income security with the potential for future growth.

Kermode says Dissero Brands is committed to the property, having worked with the owner on a substantial refit of the internal areas to suit their needs.

"The refurbishment was done in close consultation with Dissero. The result is a modern, open-plan office with a loft-style warehouse feel, with features such as polished concrete floors, exposed brickwork, glass partitions, a high stud and exposed beams and duct-work."

Kermode says Dissero also has a strong tenant covenant. The business owns a number of brands which are marketed in over 60 countries, and is ranked among the top 125 licensing companies by Licence, the leading US industry magazine. Dissero also manufactures a range of products in China, which it distributes globally.

One of the apartments is tenanted on a fixed-term lease to March 2012, while the other is a periodic tenancy. "The building's city-fringe location close to Newmarket's shops and amenities means the apartments will always be easy to let," says Kermode.

Davies says the area's mixed-use zoning gives the future owner great flexibility. "There is excellent potential for future development for an owner with a long-term view, who could modify the property to offer either 100 per cent office space or retain a mix of office and residential."

Permitted activities in the mixed-use zone include childcare centres, education facilities, entertainment providers, retail, healthcare providers and restaurants, as well as accommodation and offices. The zone modification also provides the option to extend the height up to 21m.

"In the meantime, the property offers a secure, income-generating investment for at least six years, meaning it would also suit a passive investor - perhaps a residential property investor who would like to diversify through purchasing a small, primarily commercial holding," Davies says.

Kermode says the property is on a quiet side street, with the Domain and Newmarket's shopping, gyms and Olympic swimming pool within a few minutes' walk. Buses and trains are also within easy reach.