Selling a Commercial Building in Minneapolis Without Listing It: What a Direct Offer Looks Like
Almost every building we own was never on the market. The owner called us, or we called the owner, and sixty days later we owned it. No sign in the yard, no listing, no tenants finding out from a broker's flyer.
Owners ask me what that process actually looks like, and whether they are leaving money on the table by skipping the listing. Fair questions. Here are the honest answers.
What a direct sale looks like, start to finish
Week one: the call. You tell me the address, roughly what is in it, what you owe, and what you are trying to accomplish. Cash out? Retire? Settle an estate? Get out from under a tenant problem? Defer taxes? The answer changes the offer.
Week one, still: the walk-through. I come out with our construction manager. We look at the roof, the mechanicals, the parking lot and the vacant suites, and we tell you what we see. If the building does not fit, I say so on the spot and try to point you somewhere useful.
Three business days later: a written offer. Usually more than one. All cash at one price. A higher price on a contract for deed or with seller financing at a rate that beats what your bank pays you. A partial sale where you keep a piece. Or a 721 contribution to our fund where you defer the tax entirely and receive units and quarterly income. You pick.
Weeks two through four: diligence. Leases, rent roll, operating statements, title, survey, environmental if the history calls for it. We have done this a hundred times and we do not re-trade at the end. If something shows up, we talk about it in the open.
Weeks five through eight: closing. Through our affiliated title company. Your tenants get one letter with a new address for rent. Our maintenance team is in the building that week.
What you skip
- The commission. Six percent on a $3 million building is $180,000.
- The marketing period. Three to nine months of tours, offering memorandums and buyers who cannot get financing.
- The financing contingency. We buy with equity we have already raised and community banks we have used for two decades.
- The exposure. No tenant learns you are selling until you have a signed deal. That matters if you have leases coming up.
- The repairs. We buy as-is. We have crews. The roof is our problem the day we close.
What you give up, honestly
A listing exposes the building to every buyer in the market, and sometimes one of them overpays. If you have a fully leased, freshly renovated building with long credit leases, list it. You will probably get more than we will pay, and you should.
What we are good at is the other building. The one that is 60% leased, needs a roof, has a tenant who has not paid since spring, or has three partners who cannot agree. Buyers who need a lender cannot buy that building. We can, and we will pay a fair price for it because we know exactly what it costs us to fix.
Price or terms
Here is the thing most sellers miss. The highest cash price is not always the most money.
If you carry paper at 7% on a contract for deed, you get a higher price and an income stream, and you spread the tax over the years you collect it instead of paying it all in one April. If you contribute through a 721, you defer the tax entirely and turn one building into units in twenty-three. On a low-basis building, the after-tax difference between a cash sale and a 721 can be more than a million dollars. I wrote up the comparison here.
We structure the options. Your CPA tells you which one is worth the most. Nobody on our side gets paid a commission to push one over the other.
What we buy
Multi-tenant office, flex, office-warehouse, industrial, neighborhood retail and small multifamily in the Minneapolis–Saint Paul metro. Ten thousand to two hundred thousand square feet. One million to fifteen million in value. Any condition. Portfolios welcome.
If that is your building, send me the address and a rent roll if you have one. Three business days later you will have a written offer, and you can decide from there. No obligation, and I will not call you every week if the answer is no.
Mike Sowers, CCIM founded Commercial Investors Group in 2005 and is the Managing Member of AlphaDiv Real Estate Fund. He is the author of the Amazon bestseller Commercial Real Estate Investing and host of the CREative Commercial Real Estate Show. mike@cre-fund.com