Equity Sale instead of Asset Sale

[Scott French]

Has anyone ever done an equity sale when selling an investment property? 

I would like to sell the entire company that owns an apartment building, to an investor that I know. the advantages to the buyer may include stepping into attractive debt (i would hold a note for the difference unless my bank would give him a second or refi the property to the new value), no reassessment of a property that has appreciated over the past 5 years, no estoppels, no need to contract new utilities, avoid using a realtor, and the company has a strong track record. I may be missing some advantages or overlooking some things that would eliminate the above advantages to him.

Thoughts?

[Roy N.]

Originally posted by @Scott French:

Has anyone ever done an equity sale when selling an investment property? 

I would like to sell the entire company that owns an apartment building, to an investor that I know. the advantages to the buyer may include stepping into attractive debt (i would hold a note for the difference unless my bank would give him a second or refi the property to the new value), no reassessment of a property that has appreciated over the past 5 years, no estoppels, no need to contract new utilities, avoid using a realtor, and the company has a strong track record. I may be missing some advantages or overlooking some things that would eliminate the above advantages to him.

Thoughts?

We have acquired properties this way, the benefits to the buyer are typically limited, if not elusive.

If I were looking at your business, based on the items listed above, only the financing arrangement would possible be of interest.   Even then, it would likely be necessary to have the lender involved/on-board.  Most lenders view a "change of control" in the same light as a sale and it would trigger the "due on sale" provision of the financing.  

While the no-reassessment may be attractive on the surface, it cannot be guaranteed as the taxing authority can alter their assessment at any time based upon the "value" of the business.   One big downside of buying the shares of the business is the buyer inherits the existing cost basis of the assets and the accumulated depreciation ... and would be on the hook for any recapture if/when the asset is sold.   Conversely, if the buyer were to acquire the asset, s/he would have a cost basis based upon the acquisition costs with no prior depreciation.

No estoppels might be attractive to the vendor, but as the buyer, I would collect estoppels as part of my diligence on the business.

Similarly, not using a realtor is attractive to the vendor (who traditional pays for the service) and of minimal concern to the buyer.  Regardless, you can sell an asset w/o a realtor.

Contracting utilities and services is not a big deal either and they will normally transition with the property if it is acquired as an asset.