One of the most daunting parts of buying or selling hundreds of units is reviewing hundreds of existing leases with landlords. There’s no getting around the enormity of this task.
The large-scale M&A deals dominating franchising today will continue apace into the next decade, with larger franchisees acquiring smaller shops and private equity buying into franchise groups across the U.S. market. Even in the current volatile economy franchises’ economic output is expected to increase. Yet should the economy turn, acquisitive franchise teams and their investment partners won’t miss the opportunity to snap up temporarily distressed franchise assets.
When you’re considering a large deal, It’s critical to remember that very few companies have experience navigating the cascade of legal, financial and real estate contracts experience required to bring such a sizeable transaction to a successful close in a timely manner. To close a successful deal, whether you’re investing, acquiring, or selling, there are three must-have resources: M&A legal counsel experienced in multi-unit franchise transactions; a similarly experienced investment banking or finance partner; and organized and complete lease records.
Imagine acquiring a portfolio of locations only to find out after closing that several locations have upcoming expirations, at this stage, you have missed the opportunity to properly negotiate with the landlords and rent will likely increase.
Anyone who’s managed more than a handful of leases knows the importance of easy visibility into lease terms without having to dig through a folder of PDFs. Most legal teams do not have the staff or the expertise to organize and summarize lease portfolios, and counsel’s high hourly fees may be better spent on structuring the transaction anyway.
An experienced lease management team can enhance your deal team by providing customized diligence reviews of leases, organizing lease and location files, and, if appropriate for your deal, maintaining lines of communication with landlords so when maintenance needs or option renewals come around, you have a relationship foundation with your landlords. An effective lease management partner also coordinates with your legal and finance teams to avoid duplicating efforts and provide materials responsive to the deal team’s specific needs.
Whether you’re preparing for an M&A transaction in the near term or you just want to be ready to go when the right opportunity appears, your team might be wise to start compiling, reviewing, and organizing [lease] records – and patching any holes – so a small detail doesn’t turn into a major roadblock.
Can a lease management partner carry some of the lease diligence load so your team can focus on closing?
About Property Works
Property Works has been an industry leader in real estate and lease portfolio management for over 20 years, providing support to companies with multi-unit locations across a range of sectors including restaurant and retail. Since 1996, we’ve handled the portfolios of numerous Fortune 500 companies, as well as small businesses.
Contact Property Works’ Transaction Support Services Team today for more information on the benefits of partnering with us. https://www.propertyworks.com
