CFO Intelligence Magazine – Spring/Summer 2024
Andrew Zezas
Real Estate Strategies Corporation, Strategist and CEO
When businesses go through a transformation — reconfiguring their operations for greater growth and efficiency, for a current or potential M&A, or to drive returns for stakeholders — real estate assets often play a significant role, notes Andrew Zezas, Strategist & CEO of Real Estate Strategies Corporation, a New Jersey-based corporate real estate advisory and transaction services firm. During any transformation effort, companies that are advised by expert real estate strategists can better achieve operating and financial efficiencies, and position themselves for greater growth.
“Your company’s opportunities may vary, depending on the status of the assets, so a strategic first step will involve reviewing and categorizing your real estate,” he says. “Outside of bankruptcy, an experienced strategic real estate advisor can assist in determining how owned facilities may be refinanced, sold, leased in total or in part to third parties, or positioned to generate revenue. And in the case of a company that is emerging from bankruptcy, a court-appointed trustee will frequently collaborate with transaction experts to position real estate assets to enhance the company’s operating efficiencies, so the company will emerge as a stronger entity.”
OWNED FACILITIES
According to Zezas, a company that owns its facilities should seek to deploy them in a way that promotes financial efficiency. If your company owns the assets outright, securing corporate financing or commercial mortgage debt may present opportunities to generate cash. However, today’s relatively high interest rates, and the foundational reasons for the company’s transformation may reduce the attractiveness of that option. In contrast, a sale-leaseback could represent a better opportunity to monetize the assets.”
“Consider, though, that such a sale-leaseback will be contingent on securing a purchaser-investor who is comfortable with the cash flow generated by the assets, and the creditworthiness of the tenant-occupants. In the alternative, your company may wish to consider converting the property to a condominium ownership, and selling portions to one or more third parties.”
Read More
CFO Intelligence Magazine – Winter 2024
Andrew Zezas
Real Estate Strategies Corporation, Strategist and CEO
The U.S. commercial real estate market appears to be facing a potentially debilitating time bomb with a $1.5 trillion fallout and a 24-month fuse. Many middle-market and smaller commercial tenants could get caught up in the ensuing blast, warns Andrew Zezas, Strategist & CEO of Real Estate Strategies Corporation, a New Jersey-based corporate real estate advisory and transaction services firm. But forward-thinking occupants who plan ahead may be able to avoid the carnage, he adds
FOREVER LOANS UNTIL THEY AREN’T
“Commercial real estate loans are often known as ‘forever loans,’ since landlords typically never pay off what are frequently interest-only loans — until they sell the property — instead typically rolling them over every five to seven years,” explains Zezas, Strategist & CEO of Real Estate Strategies Corporation, who also serves as Host, Publisher & CEO of CFO Intelligence magazine. “But in this cycle, the refinancing process may not be so simple, given the turbulence in the office market as remote employees balk at return-to-office mandates, driving companies to reduce their footprint, and occupancy rates plummet. The question is this: if landlords cannot secure replacement loans on viable terms, will this cause more building bankruptcies and drive other landlords to return their buildings‘ keys to the bank? That is already beginning to happen. Many commercial tenants believe that their leases will shield them if the above occurs, but unfortunately, that may not always be the case.“
It‘s not a theoretical question. The recent national office vacancy rate has jumped to nearly 18%, a 30-year high, while some individual markets, like San Francisco, are already at nearly 30%. These kinds of vacancies can make banks hesitant to refinance existing loans, especially given the Fed- and bank shareholder-driven tightened credit environment, positioning many properties for possible bankruptcy, sale, or other circumstances and, subsequently, new landlords.
Read More
CFO Intelligence Magazine – Spring 2023
Andrew Zezas
Real Estate Strategies Corporation, Strategist and CEO
A large, publicly held multi-billion dollar company wanted to sell its West Coast subsidiary, along with the building that housed it. But after putting the unit on the market and identifying a buyer, the negotiations nearly broke down during the 11th hour the would-be buyer refused to include the building in the transaction, and demanded a reduced price for the subsidiary. Scrambling to separate the assets at the last minute, the seller did manage to find a buyer for the building, at a $30 million discount, while losing considerable value on the final sale price of the subsidiary
“A major sell-side goal in an M&A is ensuring that the transaction is completed within a reasonable timeframe, with minimal cost, and at a sale price that reflects an appropriate enterprise value,” counsels Andrew Zezas, Strategist & CEO of Real Estate Strategies Corporation, a New Jersey-based national corporate real estate advisory and transaction services firm.
For a seller, an intelligent M&A strategy starts with the recognition that potential buyers generally fall into two broad categories:
- Financial Buyers: Private equity or other investors who may not be in the same line of business as the seller, but who believe they can enhance operations and achieve a better ROI; and
- Strategic Buyers: Operators in a similar or related business who seek to expand or enhance their current product or service offering by acquiring and operating other companies.
“Financial buyers are generally interested in the cash flow that a business generates, and they have a predetermined exit strategy,” observes Zezas, who is also the Host, Publisher & CEO of CFO Intelligence magazine. “Consequently, they may not have the expertise needed to run the business in a highly efficient manner, and will probably look for companies with an effective management structure and employee base already in place.
Read More
CFO Intelligence Magazine – Winter 2023
Andrew Zezas
Real Estate Strategies Corporation, Strategist and CEO
A successful North American division of a European global manufacturing company was about to close on the purchase of a smaller competitor with significant real estate holdings when the buyer had some second thoughts about existing facility leases at the target company, according to Andrew Zezas, Strategist & CEO of RealStrat, a New Jersey-based corporate real estate advisory and transaction services firm.
“The target company was in Chapter 11 bankruptcy when the deal was made to purchase its assets, so the buyer had an opportunity to renegotiate the commercial leases on the 14 North American locations,” said Zezas, who is also the Host, Publisher & CEO of CFO Intelligence.
“With little more than two weeks left before the transaction was set to close, Real Estate Strategies Corporation was engaged to see about restructuring the leases in a way that would be more favorable to the new owners without disrupting the existing relationships with the landlords. By moving in a timely manner to analyze the market and tapping a series of experts, we were able to renegotiate the leases on all 14 facilities while avoiding $17.7 million in costs for our client.”
For many businesses, he adds, “particularly middle market companies with under $1 billion of revenue, real estate makes up a serious asset class. But real estate-related issues are often neglected until a sale or merger occurs and then it becomes a mission-critical rush job.”
Zezas has more than three decades of experience under his belt, leading strategy and executing acquisition, disposition, and advisory projects for clients, with a particular focus on office, distribution, manufacturing, technology, healthcare, and life sciences. He notes that now, with the chances of recession clocking in at 90% according to top economists, more CFOs and other executives are waking up to the value-added benefits of analyzing their companies’ existing or potential real estate holdings.
Read More
