Steve Kawulok, Fort Collins CO - Some recent commercial real estate investment transactions our office participated in make good case studies of strategies that are smart for both seller and buyer. In today’s market, it is interesting to see the strategies play out in a win-win scenario.
We marketed and sold a Leed certified “green” flex building for about $1.2 million to a life insurance company. The sellers offered a sale-leaseback as owner-operators of a successful local company who had developed the real estate along with operating their successful business. The owners were transitioning out of full time management, and wanted to lessen their personal debt as part of an asset management strategy. The buyer needed to increase yield on their investments and were attracted to an unleveraged return of about nine- percent.
In a second scenario, we marketed and sold a $8.9 million industrial property primarily used for beer distribution. The seller wanted to reduce debt by taking some of the equity from the sale and applying it to other property holdings in his portfolio. The buyer wanted to secure the nice 10%+ return on the purchase. The buyer also recognized that the property was on a rail siding, which is rare in our area, and had a tenant base in an industry seen as recession-proof.
The third scenario involved a $1.3 million sale of an industrial property, which we listed and sold. A national company occupied the building as a single tenant, and had just signed a seven-year primary term lease. The sellers wanted to reduce their debt exposure on the property as they were in the process of consolidating their own business locations. The buyer sought the nice cash flow generated by the purchase and utilized a 1031 tax exchange process to obtain the property. Rather than pay capital gains tax from another sale, they rolled into a higher yielding property.
The final study property is a multi-tenant flex property we marketed and sold for $575,000. The family that sold wanted to use the equity from the sale to deleverage their other real estate holdings. The buyer had just sold some land to a national chain and wanted to obtain a higher yield on investment compared to depositing the proceeds into a money market fund, or a bond investment. The property was purchased at a price below replacement cost.
In all cases, sellers were motivated by a deleveraging strategy to strengthen their overall financial status. Buyers sought out higher yielding investments, while still making sure the underlying real estate had intrinsic value. The sales ranged from six to seven figures, and involved individuals, families, corporations, and institutions.
Smart sellers and smart buyers… You don’t need an MBA degree to learn the lessons of these investment sales!
Tags: Commercial Real Estate, commercial real estate strategy, deleveraging real estate, real estate investments