In most lower-middle-market transactions, real estate is either the hidden driver of enterprise value or the source of the biggest diligence delays. Preparing the property early doesn’t just smooth closing: it can lift proceeds, reduce tax friction, and strengthen buyer confidence.
1. Confirm Structure and Title Alignment
Clarify how the property is held: OpCo, HoldCo, or personally, and confirm intercompany leases match reality. Misalignment here complicates share vs. asset sale mechanics, triggers land-transfer tax issues, and can stall financing approvals. A quick title and corporate record review eliminates surprises later in the data room.
2. Benchmark Rent and Lease Terms
If the property will be retained post-sale or repositioned through a sale-leaseback, ensure the in-place rent reflects market value and supports the target yield. A below-market rent may feel tax-efficient today but erodes sale price when cap-rated by investors. Conversely, documenting a fair-market, arm’s-length lease can unlock 100-200 basis points in valuation spread.
3. Quantify Deferred Maintenance and Compliance Exposure
Lenders and acquirers underwrite risk, not stories. Small items: aging roofs, HVAC inefficiencies, missing environmental reports, create discount pressure or escrow holdbacks. Commissioning a light building-condition review and updated Phase I environmental report signals diligence readiness and often costs less than a single price adjustment.
4. Separate and Normalize Property Financials
Pull property-level operating costs, tax assessments, and maintenance contracts out of general ledgers. Clean NOI data enables buyers to model return on capital accurately and shortens review cycles. If the sale involves a leaseback, this transparency allows investors to price yield compression more competitively.
5. Create a Property Narrative for the Deal Book
Beyond compliance, articulate why the property is strategically “sticky”, replacement cost, logistics network, zoning, workforce access. A concise narrative, backed by metrics, helps acquirers justify paying for durability rather than discounting for uncertainty.
Takeaway
Real-estate readiness is deal readiness. Whether your exit involves a buyer assuming the asset or an investor funding a sale-leaseback, disciplined preparation can shift negotiations from reactive to proactive, protecting both enterprise value and timing.
