No need to wail over a short WALE

Posted Tuesday, February 24, 2015 Comments (0)

A long term Weighted Average Leasing Expiry (WALE) is more desirable for the stability of rental income streams of commercial properties and an important factor to consider when arranging finance (see our article about WALE). 

However, if properties have leases that are due to expire in the near future, thus creating a short-term WALE situation, this may not be the end of the world. What if a well-located property has a WALE of only 1 year and the owner wants a 3 year interest only loan? 

Balmain Commercial was recently able to arrange finance for such a scenario. All the tenants had different characteristics, however at the end of the day they were not going anywhere. There were lots of features present that were able to be used to alleviate, diminish and cushion the concerns of the lender. Let me explain: 

Tenancy 1 – GP Practice 

The practice, which has been operating in the area for 50 years and employs 10 practising GP’s, had recently placed a cap on its client base due to demand. Their lease was due to expire in 9 months. 

Tenancy 2 – Pathology 

A blood pathology group, who had agreed to pay their share of land tax on the last Option renewal, had also at the time recently funded a substantial fit out of the premises. Their lease was also set to expire in 9 months. 

Tenancy 3 – Psychologist 

This tenant has been experiencing a boom in business and expressed the need to acquire more space. They ended up taking on an extra 30sqm, which was being used as a storage space. The lease had 2 and a half years to run. 

Tenancy 4 – Physiotherapist 

This tenant had expended $200,000 in a fit out of the premises. The lease expiry was again in 9 months. 

And if that wasn’t enough, the lender’s Property Risk Manager happened to be familiar with the property and also a patient of the physiotherapist, so he knew how hard it was to obtain an appointment. He had to go elsewhere to soothe his aches and pains! 

Balmain Commercial was able to present enough extenuating circumstances to the lender in order to get them comfortable with the short term WALE situation. 

Loan approved – you don’t need to wail over a short-term WALE!

David Jones is a Director at Balmain Brisbane, specialising in sourcing commercial investment, construction and residential finance for property investors, developers and owners in South East Queensland. 


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