Owner/User Buyers – Back in the Market!

Enough has improved in the economy recently that Owner/Users are back in the buyers’ market and most likely for good.

Here’s why. Over the last several years, companies have been looking for ways to survive. They’ve become lean and mean, cutting costs wherever possible, trying to remain profitable amidst the economic turmoil. Executives, unwilling to make commitments about the future of their business, have been signing short term leases – not buying real estate.

That trend has changed. Business has been improving, confidence is up and now those same companies can show consistent growth and profitability, allowing executives to take the risk of making longer commitments and considering a real estate purchase.

Major advantages to the buying decision are flexibility, agility and possible gain on the value of a building asset. A company with good credit that purchases a building, leases it to themselves and then places it on the market for sale can potentially achieve a substantial profit.

Banks are more eager to make owner-occupied loans as well, making the purchase decision more attractive. As companies are strengthened by the growth of the economy, banks are approving more loans. For the 12-months ended Sept. 30, 2013 (the last full quarter for which bank statistics are available), the nation’s banks increased the amount of owner-occupied CRE loans in their portfolios by $8.11 billion – a 1.7% increase to a total of $475.14 billion. Mark Raffield, Vice President and Senior Business Development Officer for Wells Fargo SBA Lending, attests to this change saying their “SBA loan volume increased by almost 30% from 2012 to 2013.” Wells Fargo’s underwriting has changed as well. Now Wells Fargo is willing to do projection-based deals as long as the last two-year trend is positive and the business broke even during its last operating year. Wells Fargo can now fund up to 90% of the property purchase price plus closing costs.

In order to achieve the best value for your company, forward thinking and planning ahead is key. Contemplating the real estate market as well as your company’s needs go hand in hand in strategic planning. If you are interested in exploring a purchase or lease in the real estate market, email me at chris.crabtree@cassidyturley.com and we can look at your strategic options together.