Purchase-Contract Considerations

Some of the deal points, reps and warranties listed above are more important than others. Whether there are some deal-breakers in the list really depends on the overall contract terms, price and upside potential of the business.

Don’t lose sight of what you’re trying to accomplish, and don’t shoot yourself in the foot trying to negotiate the best contract ever written. If a seller refuses to provide a due-diligence item or won’t agree to one of the reps and warranties, it may indicate a problem. At the least, it’s a yellow flag.

For example, let’s say the facility you’re purchasing has revenue from outdoor boat/RV parking included in the net operating income. If you find out, after negotiating a purchase price, that the property is not zoned for this use, you’re at risk of losing that revenue and may be over paying for the business. You may still want to complete the deal, but at a minimum, you have an opportunity to renegotiate the price to reflect the potential loss of revenue being generated from a non-approved use.

Keep in mind the above list of contract considerations is not comprehensive. Even if you were able to include all of these points in your purchase agreement, it wouldn’t guarantee a trouble-free transaction. Each acquisition is unique and will have its own set of issues and opportunities.

The bottom line is, as a buyer, you should have representation in the purchase of your storage business. The real estate broker who represents you should not only be qualified to help you evaluate the acquisition from a financial point of view, he should have the experience negotiate a purchase contract that could save you time and money. 

Bill Walton is a CPA, self-storage owner and real estate broker. He is the principal broker with S&W Commercial Realty LLC, which specializes in representing buyers and sellers in the purchase or sale of self-storage properties. S&W also handles real estate transactions in the office, shopping-center and multi-family property types. For more information, call 888.525.9081; e-mail bwalton@sandwgroup.com; visit www.sandwgroup.com.