One of the main considerations for the purchaser of a commercial property is how to fund the acquisition. Regardless of the size of the enterprise, property is seldom purchased outright without financial backing from outside parties.
There may also be certain tax advantages by going down this route as well.
At Seatons, our team of highly trained legal professionals have a wealth of experience in commercial property finance and provide clear easy to understand legal advice at low sensible fees. For more information, feel free to give us a call on 01536 276300.
Where the purchaser is a company, it may consider issuing further shares to raise additional funds to invest in commercial property. This tactic may not be popular with current shareholders of the company however. A new issue of shares could potentially result in reduced dividends as a shareholders percentage shareholding becomes diluted.
This could, in turn, also have consequences on voting rights. Publicly listed companies will also be under additional regulations before shares can be issued.
The amount a purchaser can borrow from a Bank or Building Society depends on two main factors. Firstly, the value and condition of the commercial property itself needs to be checked. This can be done by way of a valuation and survey of the premises. Secondly, details and evidence of the company’s own financial position needs to be provided.
Lenders will always require a valuation and survey to be carried out against the property. A qualified valuer and surveyor usually carries this out. The report will detail any defects inherent to the premises, and whether there are any potential restrictions which could affect the business’ ability to run its operations. These could of course have future implications on debt repayments. It is always recommended to obtain a full structural survey for commercial premises as these provide a much more comprehensive description of the property.
Sale and Leaseback
Businesses can raise funds against the value of its property and remain in occupation by entering into a sale and leaseback arrangement. This involves the freehold interest in the property being sold, with the buyer leasing it back to the seller at a market rent, immediately following completion of the sale. In this way, the former owner can raise capital for whatever purpose it requires. The buyer will see a return on its capital investment through the rent paid by the former owner.
Equity funding occurs when an investor and a developer form a joint venture company to acquire a development site and undertake the development. The investor take preferences shares in order to be assured of a priority return on its investment. This way, the investor is participating in the profits and losses of the development.
Commercial Property Specialists In Corby & Kettering
Hello, I am Gemma McKimmie and I am the Head of Seatons Solicitors Commercial Property Department. We aim to provide our clients with an outstanding legal service.
We will help and support you and most importantly we work hard for you.
Please contact us for a free, no obligation chat at either our Corby office on 01536 276300 or our Kettering office on 01536 311690 or contact us online.