Helping Corporations Sell the Undesirable
With creativity and forethought, unwanted assets can become hot property.
If only every property was spacious, perfectly located, and environmentally
sound. Unfortunately, as corporate real estate sellers know, many corporate
assets have little to no buyer appeal.
Today an increasing number of undesirable properties are
showing up on the market as a result of corporate downsizing, mergers and
acquisitions, and Sarbanes-Oxley rules, which expose once-hidden depreciating
assets, forcing corporations to act. But that doesn’t mean these challenging, unwanted
assets cannot be sold. In fact, the opposite is true: Unwanted assets are steadily
becoming a larger part of the $3 trillion corporate real estate industry.
Succeeding with unwanted assets takes specialized skills,
often provided by outside advisers that help corporate sellers develop creative
techniques that breathe new life into these tainted properties. Specialized marketing
strategies are the secret to extracting the full potential and value of assets
that would otherwise be tough sells.
Super Selling Strategies
Often corporate sellers look at real estate on the fundamental
level of how fast will it sell. Unwanted assets, however, pose special challenges
that require unique selling strategies.
One highly effective approach is to consolidate several “good”
properties with an unwanted asset and package them as a single transaction.
This allows sellers to offer unwanted assets at a very low rate. This tactic also
gives sellers the opportunity to sell a property they might have otherwise
overlooked, which beefs up their asset portfolio.
Another option is to do the opposite: Break large properties
down into smaller pieces. This attracts buyers with small budgets and expands the
property’s market opportunity. Because the sum of an asset’s parts is often
bigger than the whole, selling large properties incrementally is an ideal way
for sellers to increase their profit margin.
Lastly, corporations can create excitement around unwanted
assets by turning negatives into positives. For example, if a buyer is
interested in repurposing an old manufacturing plant into a modern office
building, highlight classic architectural details -- wide-column spacing, high
ceilings, large or broad window lines, façade, and brick work -- that can be preserved,
refurbished, or updated. Existing architecture also can save developers money
because they can rehab these details in future design plans.
These simple yet proven strategies often will help sellers
seal the deal. But sometimes unwanted assets have thornier issues that are not
as easily overcome.
Improving Bad Locations
Smart sales strategies won’t help when properties are poorly
located, especially when there aren’t sufficient economic stimuli to support additional
development. At least, that’s the conventional thinking. In reality, location
is not always as important as access. The last five years have seen an
increased interest in mixed-use facilities -- with easy access to public
transportation and improved infrastructure including roads, ramps, and bridges
-- but often adjacent to abandoned, formerly inaccessible properties.
It is not economically feasible for corporations to create
the necessary transportation hubs and other incentives that spur development in
blighted areas, making it possible to profit from their unwanted assets. But
they can partner with developers that have expertise with this type of
redevelopment, know the process, and can work closely with government officials
and bureaucracies to earn incentives and offset costs.
Countering Environmental Damage
Asbestos in the walls and leaking underground storage tanks
are just two of the environmental hazards that limit the resale appeal for any
property, yet they are often found in manufacturing and other corporate
To remediate these issues and protect themselves from
liability if any hazards are overlooked, corporations often invest large
amounts of capital to clean up properties without knowing what the final use
A better approach is to proactively work with buyers experienced
in environmental remediation to pen repurposing and development plans geared
toward the property’s future use.
Navigating Political Landscapes
Sometimes the challenge with unwanted assets has nothing to
do with the property itself and everything to do with the surrounding
community. Sellers should always be aware of local politics.
Frequently communities are more emotionally involved in
unwanted assets than buyers and sellers -- especially when the situation
concerns a plant closing or other matter that directly impacts the local
economy. Corporations planning to get rid of undesirable properties should meet
early and often with municipal officials, town planners, and community leaders to
test the waters and build political support.
Sellers should distribute fliers and hold community meetings
that foster a dialog about why the property is being sold and how that will
benefit the community. They should consider engaging an experienced public
relations firm to help craft the property’s story and promote it to the
community through local media.
Fear of the unknown can be eliminated by making the
community an integral part of the transaction and speaking openly and frankly,
quickly debunking rumors, and making sure the community understands how the project
is aligned with their goals and benefits the local economy.
Back to Basics
These are just some of many strategies and tactics that can
be used to turn unwanted assets into sought-after developments. And clearly,
this largely uncharted territory demands a unique level of expertise that’s not
commonly found among corporations looking to dispose of such properties.
For this reason corporations increasingly are opting out of
real estate business to focus on their core competencies and entrusting
sensitive transactions to seasoned corporate real estate professionals. Commercial
real estate professionals that understand this distinctive market can help corporations
extract capital from unwanted assets and invest it back into their core
businesses for a stronger balance sheet.