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Trucking businesses relocate for a variety of reasons, ranging from the need to get away from an aging building to rent and taxes getting overly expensive or an expiring lease term. Understanding the ...


Trucking businesses relocate for a variety of reasons, ranging from the need to get away from an aging building to rent and taxes getting overly expensive or an expiring lease term. Understanding the available options can be critical to business success as a great deal of money will be tied up in the decision.

Should you lease or purchase? Sublease or renegotiate your current deal? Mark Cascagnette, vice-president, industrial, global supply chain solutions for Cushman and Wakefield, walked motor carrier executives through the available options at our recent Carrier Workshop, conducted in partnership with Dan Goodwill and Associates.

Here’s a snapshot of what Cascagnette advises industry executives to keep in mind when considering their various options.

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TENANT/LEASING OPTIONS

Option 1 -Renewal

• Current facility works very well

• Your lease has one, two or three options

• Still need to negotiate new rate or agree to arbitration

• Simplest way

• Should complete an operating cost or TMI audit

• Ask for part of deposit back

• Usually three, six or nine months written notice required

Option 2 -Buy out the Lease

• Normally considered when three-year term remaining and under

• Sublet options and/or market conditions poor

• Landlord may have another tenant candidate

• New landlord buys your old lease as incentive to relocate you into their building

Option 3 -Lease Extension

• Lease is expiring and you need to extend your term

• Facility satisfies operational need

• No other viable options available on the market to relocate

• No lease renewal option in lease

• Not sure of long-term business plan success

• Planning to relocate into another facility in under two years

• Decided to relocate but have not found suitable building yet

Option 4 -Blend and Extend Extension

• When your renewal is greater than two or three years away, market Conditions are poor and you want lease concessions in exchange for additional length of term

• Landlord needs to be on board with keeping you as a tenant

• The building works well for the tenant

• No need to move

• Anticipate long-term tenancy

Option 5 -Assign the Lease

• Need to have this option in your lease agreement

• Typical in M&A projects

• You may have another user candidate

• New landlord buys your old lease as incentive to relocate you into the new building

Option 6 -Sell and Lease back

• Process whereby owners of buildings sell a portion or all of the property

and lease it back for five, 10 or 15 years.

• Lease rate will be at prevailing market rates

• Great way for companies to extract cash out of real estate and redeploy to other areas of the business

OWN/PURCHASE OPTIONS

Option 1 -Purchase Existing Building

• Requires anywhere from 10% to 40% cash down depending on financial institution

• Obtain a commercial mortgage

• Less expensive than buying land and constructing new building

• Allows you to control your own destiny, no landlord

• Can write off depreciation (or not)

• Land transfer taxes and closing costs

• Must pay for all capital improvements, HVAC and roof repairs, etc.

• May not be best use of your capital

• Earn equity and appreciation over time

• In good times can be a competitive advantage

• In bad times can be an anchor since it limits options and prevents flexibility in relocating

Option 2 -Design Build Purchase/Lease

• Select a piece of land and design a building -third-party d eveloper builder constructs the building and sells or leases the property long term –

minimum 10 years

• You get what you want and where you want it

• Modern efficient space for your business

• New construction and development charges very expensive, resulting normally in a premium lease rate or purchase amount.

• May be the only choice for specific asset classes (cross docks,transport terminals)

Option 3 -Buy Land and Build Building

• Usually takes one-and-a-half to two years from land acquisition to move-in date

• New construction and development charges very expensive

• Need specific skills sets to accomplish or mistakes could be very expensive

• Very time-consuming process, takes you away from your core competency

• Will need to hire architect, designers, lawyers, engineer, consultants, general contractor


Truck News

Truck News

Truck News is Canada's leading trucking newspaper - news and information for trucking companies, owner/operators, truck drivers and logistics professionals working in the Canadian trucking industry.
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