Selling Commercial Property
Discussion
Question for the PH developers. We are looking at a potential opportunity to buy some commercial property, it has planning permission to demolish and construct a 4 storey office block on the land (currently 2 storey with a bit of parking to the rear).
The question is, how do you sell off the excess floor space, we would only really take up one floor and would need to get shot of the rest. We dont want to rent as there seems to be plenty of office space that cannot be shifted around here but we do know of a few people in the same situation as us (ie wanting to buy and no longer rent).
Is it possible to sell off a second floor on a kind of freehold basis? What options do we have?
Thanks.
The question is, how do you sell off the excess floor space, we would only really take up one floor and would need to get shot of the rest. We dont want to rent as there seems to be plenty of office space that cannot be shifted around here but we do know of a few people in the same situation as us (ie wanting to buy and no longer rent).
Is it possible to sell off a second floor on a kind of freehold basis? What options do we have?
Thanks.
Way too big a topic to cover everything in a single post but here are some thoughts
Although it is technically possible to sell floors of an office block as freehold there are huge issues over obligations such as maintenance. Tou could also use commonhold but as far as I am aware nobody has been brave enough yet!
What would be a better bet is to structure it using leases
If you really don't want to rent what you could do is grant yourself a long lease at a nominal rent then sell the freehold so that the buyer gets the spare floors but you have your property without the rent burden. Before doing this you would really need to check out the tax position but the structure is workable. The landlord would maintain the building and you would pay service charge in the normal way.
Otherwise you could sell a long lease of the spare floors so that you reverse the position and you are the landlord
You would also need to consider whether the interest you are looking to sell would be marketable. There would be issues over limiting the use of the property, assignment, underletting and physical alterations and what you are proposing would be somewhat non-standard so it might have a limited appeal. In the London market, where we do most of our business, these kinds of deals are not uncommon. Regionally you often find shopping precincts where the main tenant has a long lease with a nominal rent while everyone else pays rent normally. They are slightly less attractive than normal deals because there will be no change in the rent from the long lease property so there is no value in it but the landlord still has obligations to carry out maintenance etc. There is no real profit in that so it is a business burden without adding to the bottom line
On the upside it might be possible to do a pre-let and forward sale so that you have a guarantee exit - depends on your local market. If you can go into the development knowing that you have a tenant for the spare space and a buyer who will take the investment once completed all you have to do is keep control of the build cost
We do a lot of structured deals such as this so if you are serious about the idea then mail me off line and I can expand on these ideas. We are based in London but do deals all over the country and we could put you in touch with agents to discuss how best to market the scheme. They might also be able to set up a pre-let and forward sale for you if the deal is right
Although it is technically possible to sell floors of an office block as freehold there are huge issues over obligations such as maintenance. Tou could also use commonhold but as far as I am aware nobody has been brave enough yet!
What would be a better bet is to structure it using leases
If you really don't want to rent what you could do is grant yourself a long lease at a nominal rent then sell the freehold so that the buyer gets the spare floors but you have your property without the rent burden. Before doing this you would really need to check out the tax position but the structure is workable. The landlord would maintain the building and you would pay service charge in the normal way.
Otherwise you could sell a long lease of the spare floors so that you reverse the position and you are the landlord
You would also need to consider whether the interest you are looking to sell would be marketable. There would be issues over limiting the use of the property, assignment, underletting and physical alterations and what you are proposing would be somewhat non-standard so it might have a limited appeal. In the London market, where we do most of our business, these kinds of deals are not uncommon. Regionally you often find shopping precincts where the main tenant has a long lease with a nominal rent while everyone else pays rent normally. They are slightly less attractive than normal deals because there will be no change in the rent from the long lease property so there is no value in it but the landlord still has obligations to carry out maintenance etc. There is no real profit in that so it is a business burden without adding to the bottom line
On the upside it might be possible to do a pre-let and forward sale so that you have a guarantee exit - depends on your local market. If you can go into the development knowing that you have a tenant for the spare space and a buyer who will take the investment once completed all you have to do is keep control of the build cost
We do a lot of structured deals such as this so if you are serious about the idea then mail me off line and I can expand on these ideas. We are based in London but do deals all over the country and we could put you in touch with agents to discuss how best to market the scheme. They might also be able to set up a pre-let and forward sale for you if the deal is right
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