Real Estate is an essential part of M&A process that is often not considered until very late in diligence and therefore requires a partner with incredible efficiency and skill. I’ve worked with Cresa on several transactions where real estate was a critical element of the deal and they’ve helped both me as the buyer and my counterparty get aligned on key real estate terms that made the deal work.
We’re lucky to have Cresa publish a 3 part blog series on some of the key elements of real estate in M&A.
Is Real Estate for Your Business an Asset or a Liability?
In the dynamic and ever-changing landscape of business operations, the question of whether real estate is a valuable asset, or a burdensome liability is an important consideration and one that must be weighed with the acquisition or merger of any two companies. As businesses navigate the choices between leasing and owning commercial spaces whether office or industrial, they are confronted with a complex list of advantages and responsibilities. In this blog post series over the next three weeks, we aim to dissect the relationship between real estate as an asset and a liability and shedding some light on the implications of leasing versus ownership.
Leasing vs. Owning: Finding the Right Fit
In the world of commercial real estate, businesses face the fundamental decision of whether to lease or own their spaces. Each option brings its own set of advantages, disadvantages, and considerations, shaping the trajectory of the business's financial and operational future.
Leasing: Flexibility in Focus
Leasing offers businesses astounding flexibility. The ability to adapt to changing spatial needs, relocate swiftly, and minimize upfront costs are enticing benefits for decision makers of all business types. For emerging start-ups or those companies experiencing growth spurts with a need to scale up their space, leasing provides the agility necessary to align real estate strategy with dynamic business demands.
However, it's not without its obligations. Lease agreements come with financial commitments and terms that require careful examination to make sure it is a right fit for your company. Understanding the nuances of lease agreements is crucial to avoiding unexpected liabilities down the road.
Owning: Stability and Long-Term Vision
On the flip side, ownership provides a sense of stability and a long-term vision. The property becomes a tangible asset, potentially appreciating over time. For businesses with a stable and foreseeable future that showcases growth and earning potential, owning offers a strategic advantage.
Yet, similar to leasing, ownership is not without its challenges. Property maintenance, limitations on headcount/growth, and exposure to market fluctuations are among the realities that come with owning real estate. As the owner, you are liable – which can sometimes be extremely expensive. The commitment is more substantial, and careful financial planning is imperative.
In navigating the delicate balance between leasing and owning, businesses face the crucial and never-ending task of evaluating their present circumstances and future goals to arrive at a well-informed decision for their real estate. In our upcoming discussion next week, we will dive deeper into the extensive obligations associated with leasing, shedding light on the intricacies involved. The week after, we will conclude this series by exploring the responsibilities and commitments tied to ownership. Stay tuned for a comprehensive exploration of the dynamics between leasing and owning in the business landscape.
Contact Us
Have any questions about the real estate terms in your deal? Please reach out to us at support@pemarketplace.co
Published On
Mar 15, 2024
Written By
Joe Grace, Cresa Atlanta
Category
Sellers
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