The commercial real estate market, like the residential real estate market, remains hot in the Twin Cities metropolitan area. Whether apartment buildings, warehouse space, retail locations, restaurant sites, manufacturing facilities or offices, the steady demand for commercial space continues to generate significant opportunities for real estate investors as a result of the strong Minnesota economy centered on Minneapolis, St. Paul, and surrounding suburbs.
If you have bought and held, or have developed and are looking to sell, commercial real estate in Minnesota, there are important steps you can take prior to putting your property on the market can pay huge dividends. The following recommendations are based on over 15 years of experience assisting both sellers and buyers in structuring commercial real estate transactions, spanning a variety of types of real estate, including raw land, residential developments, light industrial properties, and office complexes.
First, request a payoff letter from your lender to determine how much remains owing for either a previous financing of the property, or subsequent remodeling or improvements. Understanding the terms of payoff are usually straightforward, but if you used a nontraditional method of financing such as a contract for deed, there may be certain requirements or additional costs for making an early payoff.
Second, consider running a preliminary title search to confirm there are no liens or encumbrances on the property beyond a mortgage or contract for deed. If improvements have been made to the property, there may be mechanic’s liens that have been filed, or that have been resolved but remain of record. Further, there may be assessments or other tax obligations that are of record and will impact how you decide to price the property.
Third, if the real estate is leased, clean up the rent rolls and ensure you have written leases with all tenants. Many purchasers will be analyzing cash flow for the property and being able to demonstrate the income producing potential for your real estate is important for getting top dollar.
Fourth, gather any surveys or environmental reports for the real estate. There may be nothing except what was reviewed and examined in connection with a previous purchase. If a lender was involved, however, there is likely a Phase I environmental report and a survey. Having these materials at the ready will impress potential buyers and their representatives.
Fifth, consider the price, or price range, you will seek once the property is on the market. You may be able to perform your own due diligence on comparable sales in the locality where your property is located. The more typical approach, however, is to retain a commercial broker who has access to more market data. A good broker will be worth his or her weight in gold, although they do charge for their services. In my experience, it is rare to sell commercial property oriented to a particular industry or purpose without the use of a broker.
Finally, consider how you might be able to structure the sale. If your goal is to receive payment in full at closing, then there may be buyers who will not be able to pursue the purchase of your property. Conversely, if you have some flexibility to help finance a project through a contract for deed, you may be able to charge a premium while keeping an interest in the property in the event the buyer defaults.
In sum, whether for business succession, retirement reasons, or simply liquidating an asset for cash that can be used to in other ways, the sale of commercial real estate can be an exciting step professionally and personally. Using a real estate attorney to apprise you of options, and protect your interests is important. The expense of using an attorney is typically just a fraction of what a broker will charge for identifying a buyer interested in your property. Over 15-plus years, my experience is that attorneys facilitate transactions and help them move along in a defined and prompt manner.
If you have any questions about the sale of your commercial real estate, please contact the real estate attorneys at Trepanier MacGillis Battina P.A.
About the Author:
Minnesota real estate attorney James C. MacGillis advises clients on the purchase and sale of commercial real estate, including raw land, strip malls, warehouses and light office complexes. Jim is a trusted Minnesota real estate attorney and may be reached at 612.455.0503 or firstname.lastname@example.org. Trepanier MacGillis Battina P.A. is a Minnesota real estate law firm located in Minneapolis, Minnesota.