Many Danish companies own their domicile property. The ownership is often in the operating company itself.

If ownership is instead in a real estate or holding company, the operating company typically rents the property via an internal lease agreement.

When the company is facing a change of ownership, it's time to consider selling the property as well.

At Business Broker, which advises on the sale of businesses, partner Claus Bruun finds that most business owners want to sell their domicile property as part of a change of ownership.

How do you value a domicile property?

When a property is to be included in the sale of a business, it requires a separate valuation, explains Claus Bruun .

"The domicile property is an asset that remains regardless of whether the business is relocated. That's why we prepare a separate valuation of the buildings during the sales process. It is clear that a property with many uses and an attractive location has a positive impact on the valuation," he says, emphasizing that many business owners prioritize valuing the domicile property in collaboration with a business broker.

Business Broker advised business owners in more than 100 business transactions. The team therefore has extensive experience with individual solution models that meet the seller's desire to sell the property to the buyer of the business or, alternatively, to continue as the landlord of the buildings.

"Approximately half of the prospective buyers with whom we negotiate on behalf of the seller initially express interest in purchasing real estate as part of the transaction. However, in significantly more cases, the negotiation phase ends with us negotiating an attractive deal that includes the sale of the company's property," says Claus Bruun .

If the business buyer does not want to buy the property

In certain types of business transactions, it can be difficult to sell the domicile property to the buyer of the business. This is often the case if the buyer candidate is a private equity fund.

"Some private equity funds have a clear policy of not purchasing residential properties when acquiring companies. In such cases, we are experienced in negotiating a lease agreement that meets the seller's wishes to the greatest extent possible," says Claus Bruun .

He has several examples where the seller ultimately finds it attractive to keep the property themselves and work out a long-term lease with the buyer of the business.

This model subsequently opens up the possibility of selling the domicile property to a third party who can look forward to a fixed rental income for a number of years.

Are we at a disadvantage if we don't own our domicile property when we sell the business?

Business owners who operate their businesses from rented premises often ask Business Broker whether not owning their domicile property puts them at a disadvantage in the event of a change of ownership. Claus Bruun refutes this:

"Many buyers find tenant-occupied businesses particularly attractive because they offer freedom of action when the buyer takes over. Maybe the buyer wants to move to another location or already has suitable premises. In these cases, it's more flexible if the seller doesn't own the premises. Ultimately, rented premises can have a positive impact on the seller in the negotiation phase."

3 things you can do as a business owner when you want to sell your premises

If you are part of the ownership group of a company that owns the domicile property and is planning a sale to external buyers within the next few years, you can positively influence the valuation of the buildings yourself.

Claus Bruun highlights three important parameters that you can influence when selling your domicile property:

• Make the property attractive through timely maintenance to keep both business and property presentable
• Set a rent in line with the market - also in internal rental agreements. Unnaturally high or low rent can create noise in a negotiation with the buyer
• Get clarity on the economics of running the property - either through internal accounting or by placing the property in a separate real estate company

Here are 3 examples of change of ownership in business where real estate is included in the deal

These three cases are examples of company sales where domicile properties are included in the change of ownership. In all three examples, Business Broker has Business Broker the seller in the company's sales process:

• Technology company Danpres A/S sold its headquarters when the company changed ownership
• The international buyer of the distribution company Nicolaisen & Larsen A/S also bought the domicile properties
• The manufacturing company Erik Jørgensen Møbelfabrik A/S entered into the sale of its domicile property as part of generational succession company's generational succession

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