Last week I spent some time examining those fortuitous business owners who’ve enjoyed the good fortune of occupying a facility with which they hold title.
My question is – does it matter? You own both the real estate and the enterprise. Both have more decimals than before. Business is worth more due to rent being less than the market rate. What does that mean for real estate, thanks to forces around us such as scarcity, demand, and lack of new building starts?
In the former, a goal could be to acquire a number of companies like yours, create value, and sell the bigger unit. Typically, they’ll utilize the existing footprint and attempt to operate without moving. It’s a boon for the building owner if they’ll pay a market rental rate. Don’t forget, the profit of your group is partially bolstered by the rent discount. A huge bump in rent could crater the profit of the company.
If favor is garnered by a strategic operator, a new set of circumstances occurs. Operating within the same industry, this buyer type views the acquisition as a way to expand market share, geographical reach, or specialization. Typically, they have adequate facilities and don’t want real estate. Now you have a costly vacancy that must be filled.