If your business owns the real estate in which you operate, there is a chance you’re carrying equity that might be better invested in your operations. This equity could help you invest in growth, sustain operations during hard times, or help meet other financial obligations. Even in today’s market, investors are very interested in acquiring quality commercial real estate with strong tenants in place. Now might be a good time to evaluate the sale-leaseback option to see if this strategy is right for you.
Below are Top Tips on how to get the most out of your sale-leaseback:
- Find out what your real estate is worth today. Tax assessment value is not always the best indicator of an asset’s worth, as this type of assessment does not always take into account the most accurate information. We recommend you engage with experts from Colliers’ Brokerage and Valuations teams, who together will evaluate comparables and sales transactions throughout your local region, as well as provide real-time data and property values, to ensure you learn the precise worth of your real estate.
- Identify opportunities to improve the property to make it more attractive to an investor. Explore ways to make your property more appealing, both financially and physically. An experienced advisor can help by reviewing any leases in place and advising on how certain terms can enhance your asset’s value. An advisor can also provide recommendations on structural aspects that can help elevate your property’s worth, such as installing a new roof, completing an Environmental Assessment, updating paint or performing general landscaping.
- Develop a full understanding of tax, financing in place and other operational implications. Speak to a tax professional to ensure you are maximizing your profit. A tax expert can advise, for example, on a vendor takeback mortgage, which could impact capital gains and allow you to collect interest income, resulting in more cash flow.
- Update your business plan and financials to present your company as a desirable tenant. Showing potential buyers accurate, transparent numbers and a current business plan gives them a clear picture of where your company stands and where it’s headed, helping them assess whether your company presents a good risk. Having all pertinent information upfront also helps a buyer determine important questions to ask to ascertain your credit worthiness and the strength of your covenant. The sounder your business plan and the healthier your financials, the more attractive a tenant you are to the purchaser.
- Identify and list out your preferred lease rate, duration and terms. Remaining a tenant of the building you are selling gives you an advantage in that you know exactly what terms work for your business and cash flow; you can therefore put forward and negotiate conditions that would complement and support your needs and strategy. As an example, if you think you will be needing more space in the future, you could opt to sign a lease term with the new owner, taking into account your current and future requirements. A Colliers advisor can help determine what is best for all stakeholders.
- Define and execute a go-to-market strategy. An effective marketing strategy will ensure your property gets in front of the very people you want as potential purchasers and your new landlord. Work with Colliers’ marketing experts, who design custom strategies and use industry-leading tactics, tools and technology – from direct marketing, to digital advertising, to virtual property tours – to maximize your property’s exposure to your target market, ensuring you find your ideal buyer.
- Close and execute documentation. The sale-leaseback process requires a fair amount of due diligence for all parties involved. The Colliers team will ensure a seamless transaction, enabling you to efficiently transition to being a tenant and run your business with minimal disruption to your operations.
Learn more about Colliers’ Sale-Leaseback services.
