Client Real Estate Strategies
Live from the Georgia CPA Conference
By: Michael Bull, CCIM
I recently had the privilege of being the keynote speaker at the Georgia CPA Conference to an in-person and online audience of financial advisors and accountants. We also produced an episode of America’s Commercial Real Estate Show in front of the live audience. In the accounting world, it is easy to get caught up in historic retrospectives or swept away by macroeconomic headlines. But true portfolio value isn't built by looking solely backward; it is unlocked by looking forward three, five, and ten years to help clients navigate effective asset decisions. The commercial real estate sector is navigating a unique, decoupled landscape. Interest rates are hovering around a stabilized historical norm rather than dropping back down to almost zero, and segment performance varies wildly by submarket and asset class. For contrarian investors and forward-thinking space users, this environment is producing opportunities. In the keynote speech at the CPA event, I shared several client strategies and creative asset maneuvers. These are a few of the concepts I shared in more detail at the event.
The Ultimate Contrarian Opportunity:
The Office User Windfall
The generic headlines might tell you that investing in office properties should be avoided, but seasoned investors remember when the same narrative was applied to retail during the e-commerce boom, or homes during the 2008 foreclosure crisis. In both cases, the contrarians who bought at the bottom or soon afterward benefited greatly. We are seeing a massive paradigm shift in office assets. Due to a near-total halt in speculative office construction and soaring replacement costs, coupled with current office values, some larger office properties are trading at deep fractions of what they would cost to build. Simultaneously, supply is shrinking in major metropolitan areas like Atlanta as older stock is converted or torn down for multifamily or mixed-use developments. Meanwhile, corporate requirements like culture, morale, training, and more difficult cybersecurity are keeping the slow-but-steady return-to-office momentum alive. I predict office values will increase faster than we might think today, especially in markets with job and population growth.
Why Office Users Should Take Notice
If a business owner or a stable medical group has predictable requirements, continuing to lease might no longer be the best move. Through highly leveraged SBA financing options, stable business tenants can acquire their own space with minimal cash down, frequently bundling build-out costs and specialized equipment directly into the loan. By doing so, they eliminate annual inflationary rent escalations, pay down principal while operating their businesses, and can build considerable equity over time. When we run a comprehensive lease-versus-purchase analysis for a ten-year hold, factoring in principal reduction, tax advantages, and capital gains, purchasing will regularly outpace leasing. Advisor Pro-Tip (The Joint Venture Value Add): If you or your client is an office user who makes a higher return investing directly into business operations than in real estate, consider partnering with an investor. The investor brings the capital to purchase a vacant or under-leased building at a lower baseline valuation. You or your client moves in as the stable anchor user, instantly boosting the property's value while gaining partial ownership with no money down. Then you might consider accessing that immediate appreciation via a sale-leaseback.
Selling a Business:
Sell the Real Estate First
For business owners sitting on real estate equity, a structured Sale-Leaseback is one of the most efficient tools to maximize absolute corporate valuation. When a business owner prepares to sell their company, buyers typically value the core business on a multiple of EBITDA plus some other factors, demanding high historical rates of return on their operational cash. If the real estate is bundled carelessly into that corporate sale, the owner might leave millions on the table. Instead, a business principal might sell the real estate first, then sell the business afterward. Real estate investors purchase stable properties based on capitalization rates—meaning they accept a fraction of the return required by a business buyer. By monetizing the real estate separately at a lower cap rate, the owner extracts 100% of the property equity, strip away strict bank debt covenants, and preserve the right to assign the lease to the future buyer of the operating business.
The Mistakes to Avoid
The single biggest mistake we see owners make when attempting a sale-leaseback is taking a property to market without finalizing the lease documentation beforehand. On a sale-leaseback, you are primarily selling the lease contract and the credit strength of the tenant. The underlying parameters should be engineered first—establishing clear terms, predefined annual escalations, and flexible sublease or assignment parameters to protect operational agility. Failing to construct the lease before running a competitive process destroys deal leverage. The second mistake to avoid is selling to an off-market buyer without running a proper disposition process. Adjust supply and demand to your benefit by utilizing a broker with experience and a proven marketing process.
1031 Exchange Best Practices:
Moving Out of High-Management Assets
We are witnessing a high volume of private investors, multi-family portfolio holders, and landowners looking to downshift active management burdens. Moving out of high-management residential units or non-income-producing land into a stable, single-tenant net-lease (STNL) asset can be an attractive wealth-building playbook. However, the mandatory 45-day identification window within a 1031 exchange causes anxiety for some clients. To improve execution and reduce risk, we utilize several best practices. Here are three of them:
● Pre-Market Evaluation: Before you or your client's relinquished property is officially listed, establish your target replacement parameters and evaluate baseline valuations and cap rates.
● More Replacement Property Options: The moment a contract is signed on the relinquished property, step up the pace. Initiate a definitive daily review protocol with your broker to issue review possible properties and make offers. Your goal is to do initial underwriting and due diligence before your 45-day clock starts ticking.
● The DST “Insurance” Strategy: Utilize a Delaware Statutory Trust (DST) replacement option as “insurance” to facilitate of 1031 in case you can’t find a suitable property severely. If an identified property falls through or an investor is faced with fractional "boot" (e.g., loving a primary replacement property but having an extra $500,000 left over), a high-quality DST can absorb the balance to ensure a full, tax-deferred exchange.
Installment Sales
Don’t Rule Out Owner Financing
If a principal is selling an unencumbered asset, doesn't want to step into a1031 exchange property, and simply plans to stick proceeds into fixed treasures or other safe investment vehicles, Owner Financing might be a great option. The advantages can be so beneficial, we have had some sellers who would only sell if owner financed. By acting as the lender, the seller captures additional interest income while utilizing an installment sale framework to step down their immediate tax exposure over time. In non-judicial foreclosure states like Georgia, this can be an incredibly safe play. First, make sure the buyer has experience in the asset type and good financials. To insulate the seller further, verify that agreements carry a robust down payment, first mortgage position, personal guarantees, prohibition clauses prohibiting junior liens, cross-default clauses and other terms for increased security. The owner financing option might also help the property sell faster, close with less contingencies, less closing costs, and at a higher price.
Final Thoughts:
Leverage Valuation Intel
Data metrics and generic capitalization rate averages are merely historical benchmarks; they do not dictate individual property performance or true forward-looking value. Whether managing single-tenant lease renewals against professional tenant negotiators, evaluating a distressed multifamily asset opportunity, or analyzing a potential disposition, ensure you work from an accurate valuation framework. Before executing a major lease or buy/sell decision consider securing a sector specific Broker's Opinion of Value (BOV) from a dedicated specialist to help you or your client make profitable decisions.
Resources
To explore more proven client strategies, secure a BOV, or brainstorm a particular mission you’re invited to reach out to the author directly. Michael is an active experienced broker licensed in all the southeast states with team members focused in each specialty. While headquartered in Atlanta, as part of TCN Worldwide Real Estate Services, he can get you the right expertise anywhere.
404-876-1640 x 101