Commercial & Industrial property investors must be aware of what is required to extract maximum value from a specific property over a period, before deciding to sell. This is according to Rainer Stenzhorn of In2assets the national property company, who says that investors often make the mistake and decide to sell their investments before grasping its true value.
"Unlike residential properties, commercial properties generally have longer-term leases in place. This places constraints on large-scale changes and initiatives to add value quickly."
Stenzhorn clarifies that a commercial property's value is directly related to its capacity to maximise future revenue streams. "Hence, the question must be posed as to the major aspects affecting the generation of future cash flows and rentals?"
"One needs to start with some homework. A good, neat, efficient filing system is required for each property. Documentation ideally includes up-to-date plans of the property, correct measurements of actual and rentable space, copies of title deeds and a thorough understanding thereof are always useful." To have this in digital format and hosted in the “cloud” is an added benefit if one requires quick access.
"One of the most important aspects is ensuring that all the leases are complete, in writing and 100% binding on the Tenant," explains Stenzhorn further. A landlord must also remember that any lease agreements longer than 10 Years must be Notarially executed and registered in the Deed Office otherwise it is un-valid
"The lease must be correctly signed by all signatories. It is also advisable to note on the lease where the deposit will remain as after expiry after five or ten years it may be difficult to trace. When one sells commercial property, the leases on the property become the single most important aspect of the property's value." The simple term applies: Income determines Value!
"Finances need to be up-to-date as well as all payments of municipal charges - even if a tenant pays municipal charges directly to a municipality, it is the ultimate responsibility of the landlord to ensure these payments are up-to-date. Rates clearance certificates will not be granted to the seller if there are any payments outstanding and new owners will also not pay a good price for a property where tenants are in any form of arrears."
Stenzhorn further advises that building cosmetics and visual outlook are always important. "These include painting neglected area as well as renovation of central and entrance areas."
"The adage in office buildings says that one must make sure the three L's are kept in tip-top shape - Lifts, Lobbies and Loo's. Good landscaping always gives a good impression as well as happy tenants. Remove all clutter and clean where necessary – first impressions do count in commercial and industrial property. This will influence decision making by current and prospective tenants.
"Additionally, one must maximise the income potential of one's commercial or Industrial property. Is there additional bulk that can be used for further development? Can one create additional parking? Could an extra floor be added? In certain circumstances, owners have even purchased properties purely to erect a visible signboard, which is then rented out at a huge premium and the property is subsequently sold at a significantly higher price."
"Before selling commercial or industrial property owners need to address all the above factors. “
"Depending on the property, many of these aspects may only be implemented over a period of time. If they are left too late, you may just achieve a lower selling price than ideally expected" ends Stenzhorn.
