In this video, I share the #1 provision to eliminate in your buyer’s offer and the best way to sell a commercial property.
And I’ll show how one owner achieved a 10X equity multiple allowing the buyer to double its food distribution to 10M tons of food per year.
See why continuous marketing is the best way to sell commercial property to the right buyer for the right price with confidence.
I took on a 40,359 SF industrial building in Lowell, Massachusetts. When we first brought it to market, we were able to secure a buyer within 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 to allow him to move his company in and operate within the facility. And this required us approaching the abutter to ask if they would agree to a zoning change because there was a very small portion of their property that had to be rezoned.
After about two months of back and forth, we 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 happened during that time 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 first buyer to continue with his due diligence, even though 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. So I said, okay what would you like to do?
He said let’s drop our deal with this buyer and move into a contract with the other buyer. So what we were able to do at that point was to enter into a purchase agreement with the buyer of the business in the real estate.
After negotiating with six investors, two attorneys and getting all the agreements as well as all the financing completed, we reached the point where the buyer needed one more week for an extension on his mortgage contingency.
The third buyer offered a great price with a condition for us to relocate a tenant.
They said that they wanted to push to unseat the buyer on the building and made an offer that was very attractive to the seller. He decided to deny the extension with his business partner, which was mutually consented, and enter into an agreement with the third buyer.
About six months of work with the city and with the tenant, as well as the buyer’s team, we were able to accomplish that deal and get the buyer satisfied with the tenant relocating out of the property to a city owned property.
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.
The other thing is that the buyer who ended up being a food bank. In 2022, they estimated that they were going to distribute 5 million tons of food to the community from their old facility. In the new facility, they were going to move into and in fact purchased they would be able to distribute an estimated 10 million tons of food for the community.
In your purchase agreements, your offers, and letters of intent, there’s going to be a provision that will find its way in from time to time.
Tip #1: Remove the provision that once the buyer puts the property under agreement, the seller will cease soliciting offers from any other buyers.
If you are selling industrial, office, multifamily, retail, or land investment property, I recommend that you do not agree to that provision. You should have the right to solicit backup interest for your deal. It allows you to generate leverage for you to negotiate forward with your buyer.
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.
Tip #2: Do not agree to withhold from continuously marketing your commercial property while you’re selling it.
Ultimately, what this allowed us to do is even though it took three buyers to finally get this deal cut, we were able to use the best way to sell a commercial property for significantly more money than the seller had anticipated. He was very happy. We were also able to facilitate a deal that allowed for the community to achieve a fantastic resource in bringing 10 million tons of food to the community, which we’re really excited to see happen as well.
Tip #3: 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.
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