23 Aug WHAT ARE REAL ESTATE PORTFOLIO PURCHASES AND WHAT ADVANTAGES DO THEY HAVE?
What are real estate portfolios?
They are a set of properties that have some of these characteristics:
– A linkage for being elements of the same business or use (e.g. as located in a bussiness center or hotel complex or are linked for responding to reasons and organizational needs of the seller’s company to order its business or to liquidate assets together); Or
– They belong to the same person/s, owner of such properties.
What are the advantages?
The acquisition of real estate portfolios for the buyer has the advantage of obtaining a better price for the whole than the one that could be obtained for each of the independent properties.
In addition, the plurality of acquired estate elements allows the buyer’s investment to be diversified, limiting the risk arising from the concentration of assets in a single element.
On the other hand for the transmitter, the sale of real estate portfolios usually offers the security of a solid offer and favorable payment terms, offered by the acquirer, usually a solvent and recognized company.
Finally for the transmitter this form of sale offers the advantage of having to negotiate a single standard contract, which makes the context more simplified, with closed or very similar conditions for the whole of the properties, with a single acquirer or communicating party.
How does the sale work?
Usually the transmitter commissions a real estate consultant or investment bank to manage the disposal process, which usually consists of the following steps:
1. Presentation of the sales directory to a selected group of viable buyers.
2. Formulation of first estimated offers of interested buyers and selection of a set of them.
3. Those selected carry out an audit of the properties that make up the portfolio, for a defined period.
4. Submission of binding offers.
5. Choice of the final buyer and formalization of the sale of the real estate portfolio in favor of the selected one.
Is there a downside?
Generally for the buyer there is a reduced margin of negotiation on the conditions of the acquisition, since these are frequently pointed out from the beginning by the seller and must be subscribed by the buyer as a requirement when formulating their offer.
In addition, for the seller there is usually a decrease in yield, since the sale price of a real estate portfolio is usually less than the sum of the prices to be expected for each property individually. This disadvantage, however, may not be such in reality, since to be considered this factor properly, the higher costs of the multi-sales approach would have to be accounted for, such as those derived from a multiplication of efforts and resources, the possibility of depreciation by a larger timeline and the possibility of unpredictable variations in the organizational structure or decision-making by the seller.[:]