Special considerations when selling a ~$20m commercial property?
edit: Property type is industrial. Located in Seattle, WA

I'm finding very few comps in this price range, and have a verbal offer of \~$20m. Of the comps, it seems like the price is decent as far as price per sqft, but logically, it seems like listing it on the market makes the most sense since every property is unique.

I have a few questions:

1. Are there drawbacks of listing vs accepting an offer? I suppose that commission could be saved.
2. How does one go about finding a good agent? Is it just the same as with smaller sales? Is commission more easily negotiated at this price level?
3. Does anyone here have experience selling to an REIT to defer capital gains? How would one go about finding an REIT to sell to?

The property is owned within our family, and I don't have much experience with commercial real estate, but I'm trying to learn what I can.
[{"id": "gsmpzvi", "text": "Regarding item number 1 : At my old family office, we negotiated a verbal offer (off market) only to have the seller then take and use that offer to go to market because a broker told them they should. \n\nWe A) told the broker we would never work with him again and any deal that his shop worked, he could not touch any part of it. B) the property received no offers so then we came in at $3mm under the original $17mm asking price. I left before the deal was finalized so unsure whatever happened. \n\nI know this is unique circumstance but was definitely a mistake on the sellers part. The market segment was hospitality if that\u2019s worth mentioning.", "replies": [{"id": "gsmqzzx", "text": "To clarify, the verbal offer was not negotiated. It was just a non-solicited number that a buyer gave out.", "replies": [{"id": "gsmr66w", "text": "I would not get too hung up on the $20mm. It is likely that offer was contingent on certain benchmarks and due diligence that are unlikely to be realized.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gsmrgjc", "text": "You should get a BOV (broker opinion of value). If you\u2019re in a decent sized city with a normal property type you should be able to find a broker - just Google and cold call, ask an investment sales broker what they think the property is worth. You don\u2019t need to tell them anything about the other offer and they should be able to turn something back to you in a couple of weeks.\n\nWith respect to deferring capital gains, the act of selling a real asset to a REIT alone will not allow you to defer capital gains. Talk to a tax attorney it will be the best money you will spend in the transaction. Good luck.", "replies": [], "depth": 1}, {"id": "gsmukgc", "text": "I was selling a $27MM hospital and medical office facility about three years ago where the Seller wanted a lot of restrictions on marketing which gave me some experience similar to what you are dealing with. I now structure multi-location real estate and business acquisitions for one of my clients in this range and it is usually traded off market like you are looking at (lawyers work the deal instead of brokers; am the lawyer).\n\n1. Biggest issue is there is no pressure on Buyer. If you haven't listed, they know they are the only one in the running and thus can go at their own pace, knowing you will have to start from square one if they blow out and might use that to their advantage. Higher likelihood of re-trades, etc. \n\nThe pro is that the deal can be much more amicable between the parties. It can become more of a concerted effort to get to the end and less of a \"us vs. them\" mentality. Doubly so if you have no brokers and don't have asshole lawyers. This make it easier to deal with hangups on timings etc. but can also result in multi-month contract periods.\n\n2. If you want to get a broker involved, I would look at breakdown of the top 3 Capital Markets guys in your geography for your product type and the top 2 nationally. See who traded the most, set RFP interviews and make them sign strong NDA's before you tell them anything that will give up the property. Ask them if what they will charge to list the deal first, then once you have that number, ask what they will charge to just manage the transaction. The best guys will probably give only a minor discount, if any. Commissions at that level vary a lot - again, use the interview method to get a range and don't negotiate in the meeting. \"I will take that to my principal and get back to you\" are the best words you can use. DO NOT let the decision maker meet with them until second round meetings, you don't want to lose that chess piece. If you want to DM me and tell me geo and property type, I can tell you if I know any Cap Markets guys or national guys that fall into your category.\n\n3. I have negotiated with REITS a few times and advised on some of their holdings. REITS tend to be very particular in what they are looking at; I had one decline to offer on an amazing deal because it was a quarter point outside of their cap rate range for the product type. If you want to dance with a REIT, you will need financials that are expertly prepared and the ability to present them in a deliverable fashion. If you are REIT hunting I would advise hiring a broker if not at least a lawyer familiar with the process (general rule on RE lawyers; there are two types of us - dealmakers and dealkillers. The former understands that getting across the finish line with the deal is the ultimate goal and will work toward that goal. The latter is usually either an asshole or a red ink slinger who is trying to milk billables (or both) and will fight with the other side over the structure of a paragraph for three days so they can pad their bill without really giving a shit if the deal gets done.\n\nI highly advise all HNI's to develop a really strong legal and broker relationship that they hold personally. Someone you play golf with because you enjoy their company as well as because they are good at what they do. The reason is because you can reach out to them for this kind of advice without worrying as much about them fucking you so they can get paid. \n\nLast note, verbal offers aren't worth shit unless the person has performed as a Buyer with you previously. Throwing out $20MM without having seen the actual detailed financials generally means they aren't that serious or they are low-balling the hell out of you. There are of course exceptions to every rule but 99% of our interactions are the rule, not the exception.\n\nEdit: changed SNDA to NDA. Force of habit I guess haha.", "replies": [{"id": "gspz09r", "text": "hi question on the NDA. What is the point of signing a NDA with your potential broker? is it just in case you don't hire them?", "replies": [{"id": "gsq494s", "text": "Three reasons:\n\n1. That should be SOP for any commercial owner, regardless of size, but especially with large assets. You also don't want them taking the data and shopping buyers before they have the listing. \n\n2. You don't want the market to know you are selling until you are ready for them to know. Spooking tenants, other investors in your deals, vendors, etc. can be a serious problem if they find out you are selling before you are ready for them to know.\n\n3. In OP's case, you don't want your first buyer to hear you are shopping brokers and result in him thinking you are shopping his offer. I have seen more than one offer pulled because it was being shopped.", "replies": [], "depth": 3}], "depth": 2}, {"id": "gsrx2pc", "text": "Not sure what you mean by signing the NDA before you \u201cgive up the property\u201d. From your other answer about the NDA it almost sounds like you shouldn\u2019t even give an address. Is that right?", "replies": [], "depth": 2}], "depth": 1}, {"id": "gsmza98", "text": "If you're not quite certain about the value of your property, you shouldn't be selling it without some sort of representation. In my state (Seattle, Washington), the average price per SF for a listed vs unlisted property is about 40% higher for listed properties. Sellers trying to save a little on the commissions end up losing out overall. You just don't get the exposure and you won't have the benefit of multiple offers competing with one another. Selling something of that size off-market without accurate comps could mean leaving millions of dollars on the table.\n\nCommissions are absolutely smaller on deals of that size. Up to about $4 million the commission is usually 5% (split between the listing and selling brokers), at $20 million it's generally about 2% or less, depending on the market.\n\nYou don't want to talk to just any broker. Someone who deals with retail won't have a clue what to do with hotels, and even someone who deals with 2-10 unit apartment buildings will have a really hard time with 50+ unit buildings. They're very different products and have very different buyer profiles.\n\nI deal with REITs and exclusively with large multifamily properties, happy to chat more about the process and how to find a good broker to represent you for whatever market you're in. I'll shoot you a PM.", "replies": [{"id": "hzm90ln", "text": "Hey im in seattle area. I have a question about large multifamily property requirements in cb-c area. Can i send u a pm?", "replies": [{"id": "hzmypfv", "text": "No problem, happy to chat", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gsn3xf9", "text": "Broker opinion of value is the way to go. Pay a couple thousand for a good, full appraisal from a broker (not an appraiser). Oftentimes a broker will want to get the listing after doing a BOV, but you don't need to go that route afterwards.", "replies": [], "depth": 1}, {"id": "gsn4kak", "text": "Brokers will do BOVs to land the sale business. You can probably pay a set fee for one if you feel uncomfortable knowing you might not transact with them.\n\nI haven\u2019t done this before but have studied briefly - you can contribute your property into an upreit structure to minimize taxes but the likelihood that will happen for a larger reit is very low. I\u2019ve only seen it with small private reits that are trying to do acquisitions with limited capital and a desire to keep people invested (but further diversified across more properties).", "replies": [], "depth": 1}, {"id": "gsn5hk3", "text": "What state is the property in?", "replies": [{"id": "gsnctfp", "text": "It's in Seattle, WA", "replies": [{"id": "gsolhj2", "text": "I\u2019ve done a couple WA commercial deals these last few months. Will reach out to a couple ppl and get back to you.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gsn7b9c", "text": "Your commercial property is going to be valued in a few different ways and won't be easily judged by other properties in most cases.  \n\nSaving commissions could end up costing you a lot more than you save.  A good commercial broker will pay for themselves. Not saying you need a broker, but it sounds like you have a lot of questions and they will most certainly help in that situation.  Alternatively you can hire an attorney specializing in the area, but honestly a good broker is usually going to be better and cheaper. \n\nYes, you can sell to a REIT, or anyone else for that matter, and defer taxes through a 1031 exchange.  You can buy any type of real estate as long as it is held for investment purposes, or even multiple properties, but they have to be used for investment.  Much of my business over the last decade has been acquiring and packaging properties to sell to REITs and funds.  They generally have strict standards and strenuous due diligence process.  Also know that asking for price reductions at the end of the inspection period is not uncommon.  This is another reason it is good to have someone between you and the buyer.", "replies": [], "depth": 1}, {"id": "gsnaw1k", "text": "You have not given us enough information. Where is the property located (generally)? What type of property is it (mfr, hotel, self storage, etc)\n\nBut, yes, to answer your question- you are being penny wise and pound foolish by not hiring a broker. \n\nGet a couple broker opinions of value from reputable, nations firms.", "replies": [{"id": "gsnd1yb", "text": "Updated post. Industrial in Seattle, WA", "replies": [{"id": "gsng62y", "text": "The way you were making it sound, it seemed like you were selling a circus tent in Iowa. \n\nFor sure, you need a second opinion. If you\u2019re comfortable DMing the address, I can look up some comps and let you know the zoning and overlays (for redevelopment). I\u2019m a developer, not a broker. No hard sell, just trying to help you out. It doesn\u2019t take that long. If not, no worries.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gsnd1e8", "text": "Look at the days on the market and see how long it takes to sell anything there. Sometimes it's worth it to sell a little lower to get the mortgage/utilities/taxes off your back.\n\nAnd you can accept the offer but someone has to perform the transaction, unless you know how to take care of the loans, payments, prorations, etc yourself.", "replies": [], "depth": 1}, {"id": "gsnhi4c", "text": "We\u2019ve had listings go to market and list of market buyer offers hundreds of thousands of dollars within hours of listing. \n\nAll this Commercial real estate talk and not one mention of a 1031 exchange to help defer taxes..\n\nI\u2019m not a financial or tax advisor. Consult yours", "replies": [], "depth": 1}, {"id": "gsofbe6", "text": "What area in Seattle?  Eastside, actual Seattle? Northend, southend?", "replies": [{"id": "gsrkqd1", "text": "SODO", "replies": [{"id": "gss9o7f", "text": "10 4.  I have a great eastside guy.  Let me send out a few emails and see what I come up with.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gsooh20", "text": "\\#3 - You should be able to defer capital gains through a  \u00a71031 exchange with any like-kind (research this, like-kind isn't what most people think) property.  The purchaser of your property wouldn't matter, unless you are thinking of an UPREIT (structured deal) or if they could be considered a related entity based on the tax code. It's wise to consider the net proceeds of a \"market\" deal in advance to decide if paying the tax today makes more sense than buying into the current market and deferring. My advice is to read the actual IRS rules and then talk to a trusted CPA/commercial real estate attorney. I've seen a lot of well-intended  advice that wasn't grounded in fact or was a generalization.", "replies": [], "depth": 1}, {"id": "gsr1xxw", "text": "Get a BOV to verify that offer is within range. Also add 15 bps or so to the cap the broker tells you. They always compress the cap just to get the listing. Then just wait for a buyer to cold call you and give them the price that way you never have to get brokers involved. \n\nI have one merchant developer that I\u2019ve bought almost $300 million from in the past 2 years. When he\u2019s ready to sell, he forwards me the broker BOV and I match it. Needless to say I still don\u2019t get why these brokers get pissy when I end up buying his properties off-market. You didn\u2019t have the listing and not my fault you keep giving BOVs to this guy for free. Also makes all of us laugh whenever we get an email from a broker looking for a $400K or whatever fee because \u201cthey did a BOV for the seller on the property\u201d. \n\nTl;dr- get a BOV if you think offer is low, don\u2019t sign a listing agreement, and wait for a buyer to call you at the price. Trust me, it\u2019ll happen.", "replies": [], "depth": 1}, {"id": "guzogzn", "text": "Here's what I would do to sweeten the pot...!!\n\nGet a cost segregation study done on the property they will always be free and show this to the buyer is something they can factor in and will cost you zero dollars.\n\npm me for info.\n\nExample :\n \nExisting property purchased by an investor in 2018\nSmall apartment complex with six units\nOriginally built in 1957, purchased by investor March 2018\nPurchase price $1,885,800, of which $1,131,480 is the building being depreciated\nOwner\u2019s 2019 depreciation expense with cost segregation - $502,313\nOwner\u2019s 2019 depreciation expense without cost seg - $32,573\n\nsarahveracitytax@gmail.com", "replies": [], "depth": 1}]