Elkins Lane specializes in the sale and leasing of small to medium
sized commercial buildings. We work with individuals, companies,
partnerships, limited liability companies, and families to sell or
lease their commercial buildings. Our clients do not typically
include institutional investors such as large real estate investment
trusts, life insurance companies, and pension funds. In the past two
years, these transactions have ranged from the sale of 1,500 square
foot office condominiums to 40,000 square foot mixed use office,
retail, and warehouse buildings.
A successful sale should include the following:
1. Review the existing building for repair and deferred maintenance
issues. The importance is twofold: first to increase the
marketability of the property and second to determine the cost and
benefits to actually completing the repairs or selling it as is.
2. Review comparables and the marketplace for competition and set
the price. Pricing should also take into account the timing needs of
the seller. For example, is the seller using the building for its
business and needs more space as soon as possible in order to expand
its business, or is the building subject to a long term lease with a
tenant that is paying on time? Is the seller trying to execute a
Section 1031 tax deferred exchange and subject to its stringent time
lines? (See next section).
3. Develop a marketing plan. Who are the most likely buyers and who
is in the marketplace? We reach out to both commercial brokers and
to actual buyers including tenants who are now ready to purchase a
building. What listing services should be used? Costar and MRIS are
givens but internet listing services have exploded and must be
included. We use email, direct mail and telephone calls to bring a
buyer to the table.
4. Coordinate the drafting of the sales contract or lease document.
We will work with your legal representative to ensure the best
possible legal document that protects your interests.
5. Complete any due diligence requirements including lease review,
review of tenant or buyer financial capability, maintenance
requirements, expense review, and environmental requirements.
See the Testimonial tab for some actual transactions.
Sales and Leasebacks
What Can a Sale and Leaseback Accomplish for You?
- Free-up working capital
- Create new assets
- Capital for new ventures
- Business expansion
- Personal financial uses
- Retirement/Estate Planning
- Financial Liquidity
- Potential for tax Deferred Exchange
Compelling Existing Market Conditions
In today’s market, it has become very difficult for investors to
find good commercial real estate investment property. With low
interest rates and stock market volatility, investors are always
looking for commercial real estate as an alternative placement for
their investment dollars. If you are an owner/user of a commercial
building, you owe it to yourself to take a close look at a sale and
leaseback of your property. In short, we feel that there is an
unusually fertile environment in which to maximize existing
positions in commercial real estate.
The Mechanics of the Sale and Leaseback
Quite simply, a sale and leaseback is the simultaneous sale of a
property with a leaseback by the seller at settlement.
Capitalization rates (net operating income divided by the sales
price) have sunk to seven to nine percent on decent leased
commercial properties. Even at these rates of return, investors
hunger for these types of deals particularly if the seller/tenant is
stable and has good credit (association executive directors take
note). This simple vehicle allows the owner to take advantage of the
market, retain the use and possession of the property, raise capital
and/or reduce debt, particularly if the property is fully or largely
depreciated, improve the seller’s tax picture by making the rental
payment fully deductible rather than just the interest on a mortgage
and depreciation.
Avoid Capital Gains
You do not even have to pay capital gain taxes on the sale if you
roll the proceeds into another commercial property held for
investment or for use in your trade or business (a Section 1031 or
tax deferred exchange—click on Section 1031 tab). This is
particularly useful for the building owner who completes a sale and
leaseback and wants to turn the proceeds into a long-term income
stream.
Elkins Lane Realty Advisors can guide you through the process to
maximize the return to your organization of this underutilized
commercial real estate tool.
Elkins Lane Realty Advisors Expertise
We are unique to the traditional commercial real estate brokerage
business as we fashion ourselves as consultants first and see the
brokerage as incidental to the transaction. With our additional
backgrounds in financing, accounting and real estate law, the senior
principals are experts at handling the myriad of details peculiar to
complex transactions.
We invite you to sit down with us. We are certain that you will come
away with a feeling of confidence in letting us maximize the
financial benefits from your real estate.
We also try and use a pest control service called Expest Control in Silver
Spring Md any time we switch from on property to another or
when a new owner takes over.
