Ive got a question regarding a situation that some family members find them selves in. Im wondering if you guys have any ideas on how to advise them.
They own the property that the family business has been located on for the last 20 years. It is a fantastic block in a highly saught commercial/residential area on Brisbanes city fringe. The have a large block of about 700 s/m, largely parking space with a tibre queenslander at the front, which serves as a restaurant.
The family members who run the restaurant have come to a point in life where they want to free themselves from the business. They have had offers from a number of developers who want to buy the land for their own purposes. (appartments with commercial space below) While the offers may sound attractive, I am concerned that a one off some of money will not help all the family in the long run. (there are 5 family units that are beneficiaries of the business) As you can imagine, any one off payment will not go that far over time.
Im wondering what would be involved in developing the block themselves to generate a long term income and maintain their greatest asset. Many of these guys are near retirement, and the quick cash is tempting to them – but is it the right decision???
The neighboring block owner has been applying gentle preassure for them to sell their block. He has purchased several ajoining blocks and has already leveled his own block for a new appartment development. The family have refused to sell to date, largely as they are still dependant on the business for income. Over a year ago, they did get an architect to look at doing some development on thier block, but at the time council would not approve it. This has been a bit of a mental blow, and the family tend to think that there is no other options worth investigating.
The block that they own would conservatively be worth over 1 million (at least), of which they owe less than $190,000. It was bought 20 years ago on an interest only mortgage. They therefore must have substancial equity available to use.
Of coarse, the biggest issue here is fear of more debt. We are working on changing that….
Couple of thoughts popped into my head when I read this.
1. Find out what it is worth by getting a proper valuation done. If the neighbour who obviously wants to buy it to make his development more substantial is prepared to give them a good price, why not consider selling it. Each family group then does what they want with their share. This is especially tempting if they want out of the business.
2. What is the site worth to lease the business to someone else and just hold the land for future development.
2. I can’t imagine the problems that could ensue if five different family groups all had input into developing the block themselves, especially if some or all are worried about going into debt.
Good luck, Wylie.
Thanks for you response Wylie, sorry for my late reply.
Ive been off the forum for a while.It seems that there will be a sale looming. Personally, I would develop the block or do something that generates income from it without selling – but thats just my opinion.
An independant valuation is critical, Im not even sure that they will do this…!
Thanks again….
“I have a BMW. But only because BMW stands for Bob Marley and The Wailers, and not because I need an expensive car.”
BOB MARLEY
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