We have seen a shift recently in how transactions are being successfully completed, and this shift relates to a higher percentage of commercial transactions being conducted as on market Expression Of Interest (EOI) campaigns instead of for sale by private treaty or off market campaigns.
Based on what we are currently seeing in the commercial markets, fewer vendors are selling off market unless a buyer is prepared to pay an above market price. Most of the agents we talk to are finding the best way to help vendors appreciate the true market value of their property is to conduct an on market EOI sales campaign. In most cases if a vendor is prepared to spend money for an on market campaign they are committed to selling.
This shift from off market to on market now means buyers looking to purchase a commercial investment will most probably have to compete against the strong crowd of fellow investors looking to purchase similar properties.
An EOI campaign is a challenging process whereby the purchaser has a set period of time in which to conduct initial due diligence before submitting an offer at the closing date, without knowing the other buyers offers. In some cases there may be several rounds of offers but if there is a stand out buyer in the first round then this may be enough for them to become the preferred buyer. In rare cases there may also be the opportunity to become the preferred buyer before the closing date.
Prosper Group have a high success rate with being selected as the preferred buyer in EOI campaigns, without having to pay above market for the property.
How do we do it?
Proven track record; Our proven track record of completing transactions gives the agents and the vendors confidence there is a low chance of us pulling out of the transaction during a due diligence period and a high likelihood that we should go on to complete the transaction. The last thing that an agent and vendor want is to take a buyer into an exclusive due diligence period for two to three weeks and have the transaction fall over.
Upfront analysis; To provide the agents with confidence in our offer we conduct a thorough analysis of the property to identify any issues or deal breakers. This analysis is done prior to the close of the EOI campaign and us submitting an offer. With our experience we understand the potential deal breakers for the various classes of commercial property, this gives the agent and vendor comfort that we haven’t identified any potential deal breakers that could come up in the due diligence period. We also have a track record of being able to resolve most matters that arise during a due diligence period.
Know how to play the game; Each EOI campaign is different in how it should be handled. A successful strategy depends on various factors including; the type of property, lease profiles, level of risk associated with the property, level of demand for the property, agent and vendor involved. It is critical to establish a strategy early in an EOI campaign and be prepared to alter this strategy as you progress through the campaign.
Know your market; To be successful you need to know everything about the market you are purchasing in, including; recent sales and leasing transactions and how they compare, demand from buyers, and other factors that may have an influence on the property’s value such as recent planning changes. If you are looking to purchase a premium investment which will no doubt be in high demand, you will need to have a thorough understanding of the transaction to feel comfortable in paying a premium price.
It’s not always about price; for the majority of EOI campaigns price is the overruling factor in a vendors ultimate decision but we have found that a competitive price is only as good as its terms. As mentioned before a key success factor is ‘certainty’ for a vendor. If a vendor is faced with a decision on two offers and one has a higher price but more onerous terms than a slightly lower price and clean terms, then in most cases the vendor will chose the clean terms and lower price for certainty.
Prosper Group have been successful in all types of expression of interests campaigns and have secured properties before the closing date and also secured properties without having been the highest price. So if you are finding it difficult to be competitive in this strong market feel free to call Prosper Group to see how we can assist you.
Below is a link to a recent expression of interest campaign that Prosper Group successfully handled for one of their clients;
Feel free to contact Alex Henderson or Damien Holliday if you would like to discuss how we may be able to assist you in sourcing a commercial property in this strong market.