What is the process for purchasing commercial property?
The purchase of a property for the use by a client, either as an investment or for their company, can be one of the most important decisions our clients can make in the course of their business. It can be a complicated and confusing process. The list of steps outlined below may be applicable in total or only in part to any specific transaction. A broad overview of the purchase process includes the following steps:
- Market tour and exposure to potential properties.
- Financial analysis of preferred sites.
- Submission of letter of intent to purchase primary property (or properties) of interest.
- Negotiation of final business terms with selected property(ies).
- Drafting of contract of sale and negotiation of legal terms.
- Perform due diligence to determine suitability of property(ies). This can include getting specific details regarding all or some of:
- Data and Telephone Communications
- Space Planning
- Construction Timing, Scheduling, and Pricing
- Title Examination
- Income and Expenses
- In-Place Leases
- Market Leasability and General Market Leasing Conditions for any vacant portions of the property(ies)
- Scheduling of closing.
- Finalization of space plans and final pricing for any required construction.
- Preparation of detailed construction plans for any required construction (if needed).
- Permitting and Construction (if needed).
It is important to note that some steps in the process may be done in a different order than is listed here. Additionally, some steps may not be applicable in some transactions. Also, many development transactions will have significantly more steps to deal with the feasibility of the proposed development.
How long does the process typically take?
In the most generic of terms, once a property is identified, and financial terms are agreed upon, it typically takes between 10 – 30 days to complete the sales contract, 30 – 90 days for due diligence, and an additional 30 days to get to settlement. Since each deal has its own unique circumstances, these guidelines can vary tremendously. For example, if an environmental defect is found during due diligence, it can take several months (or more) to remediate and have the site approved by the State Department of the Environment. Typically, the biggest time constraint is identifying a property that meets the criteria our clients have outlined. The property may be identified immediately, or it may take months or even years (or never) to come onto the market.
Can AGM Commercial help me value the property(ies) that I am considering?
Again, the answer is absolutely. AGM Commercial can help in creating valuations based on more than standard comparable sale analysis. Our experience allows us to value properties based also on hypothetical income investment valuations, and replacement cost comparisons. By providing all three approaches, our clients are better prepared to negotiate deal terms that help them achieve their goals. In addition, it gives our clients an understanding of the valuations that competing purchasers may be using for modeling purposes. In so doing, AGM Commercial’s understanding, knowledge, and experience allows our clients to be in the best possible position to be successful in their acquisition.
Can AGM Commercial help me draft legal documents to complete the purchase?
Unfortunately, AGM Commercial’s professionals can only provide examples of documents that may be helpful for the purpose of understanding various parts of the transaction. An attorney is highly recommended for the drafting of legal documents.
What does it cost to use AGM Commercial?
Typically, AGM Commercial is compensated by sharing the commission which the selling property owner has agreed to pay to the listing broker. In this case, there is no cost to our clients, and there are no additional fees being incorporated into the transaction. Occasionally, a potential transaction may present itself where either the seller is not paying a commission, or the selling broker is not willing to share the commission. In this case, AGM Commercial will ask our clients to pay us a commission if the acquisition attempt is successful. These cases are always disclosed upfront and there is no fee unless our client agrees to it.