Why so shy? The undisclosed buyer

Most commercial real estate transactions are negotiated between parties with full disclosure as to who each party is.

So why would do offers from buyers sometimes come in undisclosed?

Deep pockets

I don’t work with the Disney Corporation’s real estate division (I wish!) but I can take a guess that when they assemble land adjacent existing property they come in undisclosed.

There is an opportunity for would be sellers to inflate property values based on the strength and need of the buyer.

A company like Disney is likely able to pay a much bigger buck for land than most other investors. It doesn’t mean they should pay more though.

The undisclosed buyer approach only works effectively if there is an element of surprise to it. If an adjacent property owner knows a company is short on land they will likely guess who the buyer is anyway.

In the example of Disney, if they don’t already have an abundant inventory of land to develop there’s a good chance they’ve missed the boat.

Speculative buyers nearby will have already have acquired land accordingly. They may have paid a higher than market value in the first place which would be passed onto Disney if they require it.

Get in the zone

Undisclosed sales can materialize as a result of low supply and high demand which can be impacted by the finite nature of zoning and city planning.

Many municipalities will have tracks of land zoned identically. That does not mean that all bordering properties are the same, however.

In Saskatoon, for example, 8th St has a variety of zoning. The area between Clarence Ave and Cumberland Ave includes a majority of M1 zoning.

The parcels on intersections at both Clarence and Cumberland are B4.

Limited land with specific zoning results in less options and higher values.

If a business does not want to incur the hassle of rezoning adjacent property, they may have stronger motivation to pay more on an adjacent parcel that is already assigned to their use.

In this instance, they may not want to show their hand or perceived desperation to a seller so as to inflate the price further.

Making an entrance

In some cases, the undisclosed offer can come from a company that is protecting themselves on both of these fronts.

They are typically national companies that are new to the community that have a desire to set up shop but want to stay as close to market value as possible.

They are prepared to make the investment in coming to town but only if it fits the value they’ve predetermined to pay.

An undisclosed buyer typically doesn’t stay undisclosed for long. Once an offer is accepted, depending on the negotiation, they may choose to become more transparent.

Posted by Kelly Macsymic

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