How to Market a Leased Investment
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As commercial real estate practitioners, our assignments vary. But generally they are representing an owner or an occupant. Occupants need a place to conduct business through leasing or purchasing their commercial real estate. Therefore, we conduct searches, tour alternatives, and advocate for our occupant clients. With owner representation, we’re engaged to find a buyer or tenant for an empty or soon to be empty location.
But. On occasion an owner assigns us the job of selling an occupied building - also known as a leased investment. You may be wondering why a stakeholder would sell a cash flowing asset. The reasons are myriad. But typically a transition has occurred - a death, divorce, or business succession. Sometimes a change in motivation, the need for cash, or a desire to expand a portfolio through the use of a tax deferred exchange happens. Lately, as values have increased exponentially, we’ve seen a spate of unsolicited offers at eye popping amounts which has caused some owners to transact.
So, how do we market a leased investment assignment? First of all we need to understand the differences between an income generating vehicle vs an empty address. You see, a vacant building needs an inhabitant. But an occupied location doesn’t. Therefore, the prospect you’re seeking changes - from a company looking for utility to an investor driving returns. A growing enterprise cares about yard space, warehouse ceiling height and power whereas an investor considers term of lease, rents paid, and the financial strength of the tenant.
Marketing collateral for a leased investment will include information on the tenant, demographics, a rent roll - which details the leases, term increases, and expirations - and some color on the local area. Depending upon the dollar amount and nature of the offering - a National appeal may exist. As examples. A $30,000,000 logistics warehouse located in Chino and occupied by Amazon would garner interest from far and wide. But a $2,500,000 price tag with Joe’s Mufflers housed would generate local suiters.
We now understand the differences and are ready to launch our effort. Remember, we must get the information in the hands of those most likely to have an interest. Generally, an industrial building will not appeal to a group that acquires shopping centers. High rise office investors normally will not buy big box retail. But other investors will look at any asset class - office, retail or industrial or multi-family. Next, consider the investor’s source of capital. Will they use their own funds or rely upon OPM “other people’s money. And finally, what is their exit strategy. Are they going to raise rents and sell the holding or planning to keep it forever.
We’ve identified the most likely buyer pool. Now it’s a matter of choosing the platform to market our assignment. We want to cast our net where the fish are. Real Capital Markets will get your information into many sophisticated investor’s inboxes. A mailer might supplement. Certainly, calling likely candidates is effective. An email campaign to proprietary lists works great. Publishing in a multiple listing service - Costar, LoopNet or CREXI will yield results.
Ok, nets cast. Time to harvest the bounty of investor interest.