The BEST Way to Sell a Commercial Property

Video Transcript

Jeremy Cyrier:
Hey, Jeremy Cyrier here from MANSARD. So when you’re going to sell a property, there’s a little known provision in the offer or letter of intent and oftentimes in the purchase and sale agreement that can really trip you up. So, I want to talk about that today and why it matters because in this story that I’m going to tell you, it has to do with 10X returns, as well as 10 million tons of food.

Jeremy Cyrier:
So I took on a project… It was a 42,000 square foot industrial building. The property, when we first brought it out to market, we were able to secure a buyer within I’d say about four weeks of hitting the market. We had entered a purchase agreement with the buyer, but had a condition on the deal. The condition was that the buyer wanted to change the zoning on the property in order to allow him to move his company in and operate within the facility. This required us approaching the abutter, to ask the abutter, if they would agree to a zoning change, because there was a very small portion of their property that had to be rezoned.

Jeremy Cyrier:
After about two months of back and forth, we had reached an agreement, the abutter was going to consent to the zoning filing and the city was on board with moving the property through the zoning process. What had happened during that time period was the buyer had not done his due diligence and asked for an extension. When he came back for that extension, the seller decided to not allow for the buyer to continue with his due diligence, despite the fact that he had his zoning contingency. He said, in fact, “my business partner would like to purchase my company, which is in the building as well as them.” So I said, “Okay, what would you like to do?” He said, “Well, let’s drop our deal with this buyer and move into a contract with the other buyer.”

Jeremy Cyrier:
So what we were able to do at that point was to enter into a purchase agreement with the buyer of the business and the real estate after negotiating with six investors to attorneys and getting all the agreements done, as well as all the financing done. We had gotten to the point where the buyer needed one more week for an extension on his mortgage contingency.

Jeremy Cyrier:
At that point in time, another buyer had come forward and said that they wanted to push to unseat the buyer on the building and made an offer that was very attractive to the seller. So what he decided to do was to exit that deal with his business partner, which was mutually consented upon and enter into an agreement with the third buyer. The third buyer came in and had a condition for us to relocate a tenant off the property. Through about six months of work with the city and with the tenant, as well as the buyer’s team, we’re able to accomplish that deal and get the buyer satisfied with the tenant relocating out of the property to a city owned property, which will allow the buyer to use the property. So why am I telling you all this?

Jeremy Cyrier:
The reason why I’m telling you all this is because had we not been continuously marketing the property throughout that entire time period, the seller of that property would not have achieved the sale price that he got, which resulted in a 10X multiple on his equity investment over the course of seven years. So that wouldn’t have happened.

Jeremy Cyrier:
The other thing is that the buyer who ended up being a food bank in 2022 estimated that they were going to distribute 5 million tons of food to the community in this facility that they were going to move into. And in fact, purchased. They would be able to distribute 10 million tons of food for the community. So why do I tell you all this? In your purchase agreements, in your offers, your letters of intent, your purchase in sales, there’s going to be a provision that will find its way in from time to time. That provision will say that when the buyer puts the property under agreement, the seller will cease from soliciting offers from any other buyers. If you are selling, I recommend that you do not agree to that. You should have the right to solicit backup interest for your deal.

Jeremy Cyrier:
It allows you to generate leverage for you to negotiate forward with your buyer, number one. Number two, if your buyer hits a hiccup in the process, like not completing due diligence on time, needing more time for financing, having other conditions that need to be satisfied, and they come back to you and ask for extensions, it allows you to maintain some sense of power in the conversation other than just being dragged along by the buyer, as they continue to try to satisfy themselves with the conditions of their deal. So I would recommend that you not agree to withhold from continuously marketing the property while you’re selling it. Ultimately, what this allowed us to do is despite the fact that it took three buyers to finally get this deal cut, we were able to sell the property for significantly more money than the seller had anticipated. He was very happy.

Jeremy Cyrier:
We were also able to facilitate a deal that allowed for the community to achieve fantastic resource in bringing 10 million tons of food to the community, which we were really excited to see happen as well. So the power of continuous marketing means that don’t allow the buyer to take your property off the market. You can be under contract. You can let buyers know you’re under contract, but let them know that you want to continuously market and solicit interest. So if there is backup interest in the property, it allows you to sell with confidence and to continue to search to get that right buyer to pay the right price for your property. So again, Jeremy Cyrier here at Mansard. If you’ll like what you’re hearing, subscribe to our channel. Click the notification bell. And we look forward to seeing again in the future. Thanks.