Acquisitions and Dispositions: Strategies for a Successful Real Estate Transaction

Acquisitions and dispositions are two terms people commonly hear throughout the real estate process. The terminology only refers to the processes of acquiring or selling real property.

Whether a person is an investor or an owner-operator, it is always a big day when a company is either purchasing an asset or selling one. Our Los Angeles small business attorney can help you maximize the value of your assets for any real estate transaction.

Real Estate Acquisitions

A real estate acquisition involves a company getting ownership or control over real estate property. The process can be much more complicated than just signing a contract and transferring funds.

As it relates to property acquisition, companies need to keep factors in mind. Marketing can be one major factor because a company will want to generate interest among possible sellers and find the properties that will be the best investment opportunities.

A company will also want to invest in processing possible leads so they can collect all of the possible sellers and then evaluate whether an offer should be made. It will then be important for a company to perform due diligence in ensuring that a transaction will not limit a company’s ability to profit from any investment.

Information looked at during due diligence can include property zoning concerns, rent rolls, profit and loss statements, and conversations with contractors, appraisers, inspectors. The final stage will be closing and people will want to be sure to retain legal counsel for this stage.

The ultimate goal of many acquisitions will be to eventually sell property so a company can benefit from its investment. Acquisitions often lead to dispositions.

When it comes to commercial real estate, acquisitions usually come in four kinds. Office buildings and commercial office spaces can be differentiated in many different ways.

Industrial properties are often used for manufacturing, distribution, or storage and will frequently be categorized based on use. Retail buildings could be single-business structures or large, mixed-use buildings that contain multiple businesses.

Multi-family real estate involves much more variance, as they could be apartment buildings or condominiums. Whatever type of real estate acquisition a company is pursuing, an experienced real estate attorney will be critical to closing a deal successfully.

Real estate acquisition services may include:

• Research and market analysis
• Strategic planning
• Lease vs purchase analysis
• Demographic and location consulting
• Financing and lending options
• Building proforma analysis
• Sale-leasebacks
• Financing procurement
• Property survey and site selection
• Build to suit

Real Estate Dispositions

A disposition will often be the final stage of the real estate investment process because it is the point at which a company sells its property. A lawyer can work to help a company find a buyer to liquidate assets and possibly invest in another property.

There is no single way for companies to go about dispositions of real property, as the best strategy often depends on a company’s specific situation. A decision typically falls into one of three approaches.

With a traditional sale, a company will work with a broker to determine property value and market property for sale. The traditional sale is probably the most common option for dispositions, and a company will probably be working with a buyer who is willing to pay cash or get traditional financing.

Under owner financing, an investor will not rely on traditional financial institutions because they will instead act as the lender and allow an investor to make payments to them over time. If a company decides to use this strategy, it will be important to retain legal counsel for help drafting all of the different required legal documents.

The 1031 exchange is typically used as a strategy to defer tax liability and capital gains taxes. It allows a company to use the proceeds from a sale to invest in other similar property types, meaning a company will not receive any taxable proceeds from a sales transaction.

It is also possible for a company to auction property, call for offers, or attempt to market a property without an asking price. Real estate disposition services may include:

• Market comps analysis
• Broker’s opinion of value
• 1031 exchanges
• Financial analysis / proformas
• Sale-leasebacks
• Competing property analysis
• Marketing collateral, offering memorandums

Contact Our Los Angeles Small Business Attorney

Did you need help understanding the acquisition or disposition process? You will want to be sure you are working with Steinberg Law because we have decades of experience handling these kinds of issues.

Our firm can work closely with you to help you determine your needs and the best way for you to meet your goals. Call (818) 855-1103 or contact our Los Angeles small business attorney online to receive a free consultation.