Hi commercial experts,
Has anyone had much experience with buying commercial with vendor doing lease-back?
I am talking purely of commercial (ie office, industrial, retails) excluding the display homes type lease-back.– Is that in general a pump and dump strategy to bait the inexperienced and be taken as a red flag?
– Should I even consider this kind of deal?
– What are the most important questions to ask when doing due diligence for such properties?Thanks,
FXDGenerally pump and dump – but I’m sure theres exceptions to every rule. You’d have to ask yourself why they would offload a property to reduce their flexibility and rental security. There’s the increase in liquidity which may be used to invest elsewhere, but selling a commercial asset just to get access to funds isn’t sending the best signals.
I’ve known businesses who have sold their commercial properties with <3 years remaining, then not renew the next option and instead buy a new vacant on possession property – leaving the landlord in a sore spot.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Thanks Corey.
Are you saying that the lease back rental may be
inflated by vendor to distort the true value of the
property?Thanks
FXD-
This reply was modified 8 years, 5 months ago by
fxdaemon.
Thanks Corey.
Are you saying that the lease back rental may beinflated by vendor to distort the true value of theproperty?
ThanksFXDThat can be one of the things they do. They can also just have it on a standard rent – but leave as soon as they can, which if the property is in a difficult to rent area/type of property can completely tank the investment.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Alternatively when companies are asset rich and cash poor, they will sell their assets and lease them back – this is a strategy by their advisors, accountant or CFO to make them look more profitable. Freeing up the capital to fund the expansion of the business or return to shareholders.
Many accountants underestimate the value of owning their own premises – it rarely appears on their balance sheets (take a look at most listed companies and look for the properties they own – hmmm not much there, not even head office nor their production sites).
If you have a couple of spare coins, you may consider this sale and lease back opportunity: http://www.smh.com.au/business/property/soul-pattinson-puts-building-in-pitt-street-mall-on-the-market-20160622-gppe8l.html
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This reply was modified 8 years, 5 months ago by Scott No Mates. Reason: additonal information
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This reply was modified 8 years, 5 months ago by
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