ATLANTA, GA (April 9, 2012) – In a market featuring rock-bottom building prices and record-low interest rates, now is an ideal time for businesses to consider purchasing instead of leasing their real estate.
That was the consensus of the panelists on the most recent episode of the “Commercial Real Estate Show,” which provided an in-depth look at the factors making owner-occupied real estate a more attractive option for businesses.
Show host Michael Bull, the president and founder of Bull Realty, said the possibility of rent spikes is one reason to consider buying. “These prices are so low, it’s incredible,” he said. “With the lack of new construction [in recent years], I think we’re going to see some huge rents in about five years.”
Banks also are enthusiastic about owner-occupied real estate, noted Brant Standridge, a state president for BB&T. “It’s very, very attractive for banks,” he said. “Financing is readily available, and banks are requiring less and less equity.”
Firms that own their own buildings have a valuable tool for acquiring the funds needed to grow their operations, panelists observed.
“Businesses that are looking to expand, particularly small businesses, often use their real estate,” said Brent Baker, a managing partner with CIB Partners LLC. “It’s an attractive way to get long-term financing and to accomplish some things: expansion of marketing programs, adding equipment, any number of things they may want to do.”
Companies also can dramatically increase their wealth by buying a distressed building, occupying it and then later doing a sale-leaseback. “The sale-leaseback market and the single-tenant net lease market are as hot as firecrackers,” Bull said. “The value and the demand for these fully occupied properties are just huge.”
Possible changes in accounting rules provide yet another reason for firms to consider buying real estate. The Financial Accounting Standards Board has proposed changes that would classify leases as liabilities on balance sheets.
“What happens when your liabilities go up but your equity doesn’t change?” said Jeff Olson (top left photo), a partner with Babush, Neiman, Kornman & Johnson. “Your leverage ratios go off the charts.”
Implementation of the changes could spur some businesses to buy instead of lease their buildings. “They’ll say, ‘I’ll put the debt on my books but I’ll get the asset, and I’ll have an investment,’” Olson added. He predicted that, if passed, the new rules wouldn’t be implemented until 2014 at the earliest.
Daniel Latshaw (middle right photo), a partner with Bull Realty, said markets such as Atlanta, Phoenix and Las Vegas couldoffer particularly good opportunities for purchasing buildings. “But don’t generalize,” he cautioned listeners. “Look closely at your market or submarket.”
The next “Commercial Real Estate Show” will be available April 12 and will provide an update on the U.S. office market.
Contact:
Stephen Ursery
Wilbert News Strategies
Office: (404) 965-5026
Cell: (404) 405-2354
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