Selling a company with real estate portfolio?

by Readers Question

11:07 AM, 17th March 2021
About 2 months ago

Selling a company with real estate portfolio?

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Selling a company with real estate portfolio?

I’m a small incorporated landlord with a portfolio of 40 individual real estate units, namely garages. I am now considering liquidation of the company with an obvious route being selling the garages on an auction as individual lots.

Having a naturally inquisitive mind I’m trying to invent other options of achieving the same result. I’m therefore wondering if there is a market to sell my company’s shares instead, effectively transferring the entire portfolio to the new owner avoiding many individual transactions and associated overhead costs.

If details are important, all my garages are: within M25; owned outright; freeholds; tenanted; in good state of repair. I don’t expect any of the individual sales to attract SDLT in the current climate, though some sites are suitable for redevelopment and will fetch more than just individual garages they are comprised of. My current turnover is just below £60,000 and in the past, I was consistently able to raise the rent in line with CPI.

So my questions are:

Is it possible to sell the company as a whole?

How would I value this sale?

Are there any other options I haven’t considered?

I’m not in an immediate hurry but would like to exit in cash within a year.

Stanislav

Comments

Mark Alexander

11:26 AM, 17th March 2021
About 2 months ago

I think you might be pleasently surprised at how much these might sell for as a whole portfolio in a London auction.

Talk to some auctioneers about reserve prices.

It will be a lot less hassle if you can sell as a job lot.

For the buyer, whilst the individual units might all fall below the non-residential SDLT limits, the whole lot might well do so.

Therefore, maybe you mention in the sales particulars that you're happy to sell the shares in the company which owns them instead, and on that basis the SDLT on the purchase of shares would be just 0.5%.

I hope that helps?

Good luck and please report back on how you get on.

michael@mjproperty.co.uk

13:08 PM, 17th March 2021
About 2 months ago

We would be very interested to talk to you about this.

Mark Alexander

13:25 PM, 17th March 2021
About 2 months ago

Reply to the comment left by at 17/03/2021 - 13:08
Sure, what's your question?

I don't charge consultation fees to answer questions here, because I can answer them when I get time.

I'm not taking on paid consultations at the moment anyway (until 7th April 2021) because I am fully booked.

michael@mjproperty.co.uk

14:08 PM, 17th March 2021
About 2 months ago

Apologies Mark- I meant for Stanislav, we would be interested in purchasing the company

BernieWales

16:33 PM, 18th March 2021
About 2 months ago

We would be interested in discussing a purchase of the company. Can you email me?

alocjtoi

12:35 PM, 19th March 2021
About 2 months ago

Thanks everyone for the replies.

Mark, when I spoke to two of the auctioneers they both suggested splitting the portfolio over 2-3 auctions to prevent overloading and keep interest high. Selling as one job lot would severely limit the interest as it's not possible to finance this kind of real estate and the market for 15-30K properties is much wider than that for an 800K lot. Therefore I'm not very enthusiastic about this scenario.

For the rest of the proposals, I'm not really posting this question to sell my portfolio to property118 members, though I will definitely consider a suitable offer. The garages are not the usual type of real estate that has established market for and valuations vary widely, sometimes from 15K to 45K for a single garage depending on the type of sale (auction vs private) and the agent (Foxtons seem to put up exorbitant asking prices). I'm therefore asking what other options there are for a sale of this kind and company sale comes in mind. I'll appreciate ideas on how to value such a company so I can compare proceeds and expenses with individual sales.

I'm not in urgent need of sale for whatever price, my portfolio produces healthy rental income requiring very little involvement, so I will not consider offers below market value. For those interested or unfamiliar: garages are unique animals in a sense that neither landlord-friendly legislation such as Landlord and Tenant Act nor business rates apply to them, they require very little maintenance and rental voids are minimal, however it's impossible to get a mortgage for such properties and due to individual rental values being relatively small, it's not practical to delegate any management responsibilities to an agent. Garages are not often on market, so it takes time to build a sizable portfolio like mine. [sales pitch ends here]

Mark Alexander

12:40 PM, 19th March 2021
About 2 months ago

Reply to the comment left by alocjtoi at 19/03/2021 - 12:35
I once arrange finance for a fleet of portable toilets so nothing is impossible.

PS - I’ve heard all the jokes.

The business wasn’t going down the pan.

It wasn’t a crap deal

Etc. etc. etc.

alocjtoi

20:00 PM, 19th March 2021
About 2 months ago

Reply to the comment left by Mark Alexander at 19/03/2021 - 12:40
True, possible, but I was once offered 20% per annum on a loan that would be secured on garages and my personal director's guarantee. Well, my profit margins are not that high and I could get an unsecured loan on better terms, therefore I consider it's impossible to get a mortgage on this kind of property.

Mark Alexander

20:36 PM, 19th March 2021
About 2 months ago

Reply to the comment left by alocjtoi at 19/03/2021 - 20:00
The portable toilets were financed on a 5 year repayment basis at LIBOR + 4.75% and 50% LTV

alocjtoi

21:16 PM, 19th March 2021
About 2 months ago

Reply to the comment left by Mark Alexander at 19/03/2021 - 20:36
Is that based on the toilets as a collateral with no additional guarantees?

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