Dear Mr. F,
I was approached by one of our local businessmen about his company’s desire to consider a sale/leaseback of their office and warehouse facilities. The company has been around for a very long time and the owners enjoy a great reputation in our community. Is this an opportunity that you would recommend commercial investors to consider or is this too risky a venture?
Antonio F., Salem, Mass.
A wonderful question and I thank you for sharing it with me and our readers.
While money is generally plentiful in our current economy, the bad taste of the banking industry fiasco has left many lenders eager to loan monies only to those that don’t need it. I say that with my tongue planted firmly in cheek, but there is an element of truth to that statement that concerns the Fed and may be a causative factor in the nation’s economic recovery to be slower than it ought to be. It is for that reason that I encourage companies to consider sale/leasebacks – a way to obtain the monies that those entities need to grow and prosper without subjecting itself and its principals to often burdensome personal guarantees and numerous restrictions on how those monies may be spent.
Throughout the country we can find everything from Mom and Pop stores to Fortune 500 companies deciding that they are not in the real estate business and do not want their capital tied up in real estate assets. The credit is often excellent, the facilities are usually properly sized and designed for their operations and the question should not be whether an investor should strongly consider these offerings, but rather how does one get into a position to become among the first to be aware of them.
What your question brings to mind is how important it is for the investor to be “in the loop”, to get to know the leading businesspersons in his chosen community, and to understand the local business environment. We recommend that our readers become involved in the various civic organizations and religious groups within your community. Get to know your local politicians and industry leaders and demonstrate your eagerness to be a contributor to your community and to show your financial prowess and fair dealings. Antonio, you have clearly managed to position yourself into that type of respected position … the fact that a successful businessman feels comfortable enough to inquire of you demonstrates that you have earned a certain level of respect.
Of course you still have a great deal of due diligence that you must do … from a full inspection of the financial reporting on that company to an analysis of the value of the underlying commercial property should the company unexpectedly run into trouble. But you are on your way … and this question is one that demonstrates the importance of getting to know your target community and the business leaders.
We are eager to hear how this turns out.