So, the time has come… You have made the decision to sell your GSA or Federally Leased Asset. We understand that this decision could be made for any number of reasons, but it is the next few decisions that are absolutely critical to the success of your upcoming sale.
When is the Best Time to Sell My GSA or Federally Leased Asset?
The answer to this question will likely not come as much of a surprise. The best time to put your GSA or Federally leased asset up for sale is after you have obtained a new lease renewal with hopefully substantial Firm Term. More specifically, potential investors typically want to also see that the Tenant Improvements have been completed and were accepted by the Government. This is the foundation for maximizing value.
That said, in order to maximize value, there is always some risk. In this case, the risk is the “renewal risk”. If you decide to sell your asset after the Government conducts their lease procurement process, you are also accepting the risk that the Government may not select your property for the new lease term. You may hear some brokers in the market touting “GSA’s 95% renewal probability”. If you hear this, I suggest that you request to see the evidence supporting this claim. Though this statement has been widely proclaimed in the past, there is plenty of evidence that the actual renewal rate is likely lower.
The reality is that renewal probabilities are very much based on a case by case analysis, and a great deal of due diligence is required in order to give an educated, but not guaranteed, opinion.
You Made the Decision that You Want to Maximize Value When Selling Your Federally Leased Asset…. So Now What?
If you choose to pursue the path of maximum value, then the necessity for expert assistance with the GSA / Federal Government Leasing Process cannot be understated. Yes, the process can seem daunting. Yes, the language used by the Government is not typical of the industry. And despite these issues, it could be argued that they are not as important as making sure you structure the deal in such a way that is competitive (based on the Government’s evaluation methods) and desirable to investors in this space. When negotiating these deals, you must have a strategy for deal components such as taxes, TI, concessions, etc… This is where art meets science. This is where value is created. This is why a broker who specializes in GSA / Federal Government Leasing is imperative.
What if you Do Not Want to Take on the Renewal Risk When Selling Your GSA Leased Asset?
If you make the decision that you would prefer to sell your GSA or Government Leased Asset prior to lease expiration because you are not comfortable taking on the renewal risk yourself, you will be happy to know that there is a very active market for this product type.
There are several companies in this space that specialize on this exact opportunity and are more than happy to take on the renewal risk in order to increase their investment yield. But as you might imagine, they increase their yield by paying a purchase price that is below what a recently renewed lease would demand. And this is the trade off.
When it is Time to Sell, It is Important to Choose the Right Broker Representative
Regardless of whether or not you decided to pursue maximum value by taking on the lease renewal risk yourself, or you decided that exiting prior to lease expiration was the right decision for you, it is in your best interest to pursue the best representation for the sale of your asset. This decision will only increase the success of your chosen path.
There are countless brokers out there that will tell you that they can take on this listing and why they are the right person / team for this property. However, I can tell you from experience that there are only a handful of brokers that truly specialize in this niche and that I personally trust to work with my clients. These select brokers are experts at telling the story of a property. They have a deep understanding of how investors in this space evaluate and underwrite these deals so that your property is priced right, the first time. Finally, they know how to market these properties for maximum visibility to the investors that are most likely to be interested in your property.
How Can Arco Help
Arco Real Estate Solutions focuses 100% on GSA / Federal Government Leasing. Since we don’t compete with brokers that provide buy / sell representation, Arco has established trusting relationships with many of the top brokers who can assist you. In addition, we have experience with many of these brokers through seeing them in action.
It is for these reasons; Arco is well-positioned to discuss your desired goals and to assist you with identifying a qualified broker that would make a great fit for you and your asset.