Selling a company with real estate portfolio?

by Readers Question

11:07 AM, 17th March 2021
About a month 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

Amjed Khan

22:42 PM, 20th March 2021
About 4 weeks ago

Reply to the comment left by alocjtoi at 20/03/2021 - 22:36
You know your personal circumstances best. All I would say is that the tax charge will potentially higher if you withdraw funds from the limited company. I don’t think you will get entrepreneurs relief.

alocjtoi

22:51 PM, 20th March 2021
About 4 weeks ago

Reply to the comment left by Amjed Khan at 20/03/2021 - 22:42
No, the entrepreneurs relief is unlikely, but the company still owes me lots of money I invested into it, so it's not like the whole huge millions I'll make from the sale will be taxable.

Simon Lever

18:37 PM, 21st March 2021
About 4 weeks ago

There are some planning opportunities apart from just selling the whole company.
It depends on the timescale you are willing to look at and your personal circumstances.
Consider:
• Selling one or more garages still in the company and making pension contributions in your name and if appropriate family names to reduce corporation tax to nil.
• Take the money you have input out with no consequences.
• Give shares to family and use the £2,000 nil rate dividend band to not pay tax on this income.
• Use the proceeds to buy back some of the shares making the extraction a capital gain. If necessary, issue more shares as a bonus issue if the reserves are available.
• Use a combination of the above.
There are other ways but these are the simplest.
This is not advice but just some thoughts.

Mark Alexander

19:07 PM, 21st March 2021
About 4 weeks ago

Reply to the comment left by Simon Lever at 21/03/2021 - 18:37
All excellent suggestions Simon 🙂

alocjtoi

13:18 PM, 22nd March 2021
About 4 weeks ago

Reply to the comment left by Simon Lever at 21/03/2021 - 18:37
Just to make it clear: I don't need to sell the garages because of the relationship breakdown as in "divide the possessions in the course of divorce proceedings", no. The breakdown is the cause of me not wanting to do this business anymore as there's noone to appreciate my efforts and I'd rather switch to something I really enjoy doing.

As I understand all the pension schemes suggested still imply a good level of involvement in the business with side effects of optimizing tax bill at the expense of delaying cash release. My timescale is rather arbitrary, but I prefer to end it all in a year's time. I'm more than a decade away from any pension withdrawal allowance and will prefer "all of it here and now" a opposed to "bit by bit later" even if it mean paying more to the taxman.

So, back to my original questions:

1. if I sell the company as a whole, how would I value it? Is there a standard revenue/turnover multiplier or is it just the value of my portfolio combined?

2. As I said, the garages don't have a reliable reference price, what would be a good way to value one? In the past I was aiming for 10% in rent income (i.e. rent per annum multiplied by 10), but more recently this is hardly achievable. What would one be willing to pay for a freehold garage in good state of repair producing £100 per month (quite typical scenario)?

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