Why Your Corporate Property Has Multiple Values on the Same Day

About This Blog

Andrew Zezas, CEO of Real Estate Strategies Corporation and host of the CFO IQ podcast, brings decades of experience in advising C-suite executives on strategic real estate decisions. As a trusted advisor to financial leaders across multiple industries, Zezas has guided countless corporations through complex property transactions, helping them maximize value while aligning real estate decisions with broader business objectives.

In a recent episode of CFO IQ, Zezas challenges the conventional wisdom that properties have a single "market value." Instead, he reveals that your company's property can have as many as 13 different valuations simultaneously on the very same day. This isn't about subjective opinions—it's about fundamental differences in how various buyer types calculate value based on their unique business models, time horizons, and risk profiles.

For CFOs navigating real estate decisions, this knowledge represents a strategic advantage. Whether you're considering a property sale to free up capital, evaluating sale-leaseback opportunities, or reassessing your company's real estate portfolio, recognizing these multiple valuation frameworks allows you to align your property strategy with your overall financial and operational goals.

The Corporate Occupant: The Premium Buyer  

When selling corporate real estate, most companies instinctively focus on getting the highest possible price. According to Zezas, the buyer type most likely to deliver that premium valuation is the corporate occupant. Unlike other purchasers, occupant buyers acquire properties with the intention of moving in themselves after making necessary renovations.

The corporate occupant's timeline is typically more compressed than other buyer types. They need somewhere to conduct business operations, and your property fits their requirements. This urgency, combined with their plan to use the building themselves rather than lease it out, creates a scenario where they can afford to pay what Zezas describes as the "true market value" or "greatest market value."

However, finding the right corporate occupant isn't always straightforward. These buyers are often more particular about location, building specifications, and timing. While they typically pay the highest price, the search for the ideal corporate occupant can take significantly longer than finding investors willing to purchase the property. As Zezas notes, "finding the occupant buyer is not easiest, but once you find them, they will typically pay the highest price."

The Investor Landlord: Trading Price for Speed  

The second buyer type Zezas analyzes is the investor landlord—a purchaser who intends to own the building as an investment vehicle, leasing it to tenants to generate revenue. These buyers approach valuation with a fundamentally different calculation than corporate occupants. For them, purchasing your property is just the beginning of a longer investment process.

After acquiring the property, investor landlords face renovation costs, marketing expenses, leasing commissions, tenant improvements, and a potential extended vacancy period. During vacancy, they must cover operating expenses, taxes, maintenance, repairs, insurance, and utilities. Once they secure tenants, they'll pay marketing and promotional expenses, commissions, legal fees, and likely provide free rent and tenant improvement allowances.

This business model creates a significant valuation gap compared to corporate occupants. According to Zezas, "in a balanced marketplace, that investor landlord buyer would likely pay 30 percent or more less than the occupant buyer." This discount reflects the additional costs and risks they assume after purchase.

What investor landlords offer in exchange for this price discount is speed and certainty. Unlike the potentially lengthy process of finding the perfect corporate occupant, investor buyers are readily available. As Zezas explains, "Investors show up almost immediately. So if you have a timing issue and you want to sell your property quickly, it might make sense to take a discount and sell it to investors."

The Sale-Leaseback Investor: A Financial Transaction in Real Estate Form  

The third major buyer type represents a completely different approach to property valuation. Sale-leaseback investors don't want your property to sit vacant—they specifically want your company to remain as a tenant after the sale. This arrangement transforms the nature of the transaction from a traditional real estate deal to what Zezas describes as a "structured finance transaction."

Unlike other buyer types who evaluate land quality and building specifications, sale-leaseback investors focus almost exclusively on the financial aspects of the arrangement. As Zezas explains, "the entire value of a sale leaseback transaction is truly based on the cashflow that the investor buyer will derive from the future tenancy and not just the cash flow, but their impression of the credit worthiness and the risk profile of the seller."

The building itself becomes secondary to the transaction, serving primarily as collateral for what is essentially a financial arrangement based on anticipated rental payments from your company's continued occupancy. This creates opportunities for companies with strong credit profiles while presenting challenges for those with weaker financial positions.

Strategic Decision Making: Understanding Your True Objectives  

Understanding these different valuation models is only useful if you can align them with your company's strategic objectives. Zezas emphasizes that there's no universally correct approach to property sales. As he states, "There's no wrong answer. The right answer is whichever one works best for you."

The decision framework centers on several key considerations:

• Timing Requirements: Companies with flexibility on timing can pursue corporate occupant buyers for maximum value. Those needing rapid execution should consider investor landlords for speed and certainty.

• Financial Priorities: The strategic value of rapid capital deployment may outweigh a potentially higher sales price, or vice versa.

• Operational Needs: Whether you must maintain occupancy after the sale or plan to vacate affects which buyer type makes sense.

• Risk Tolerance: Some companies prefer the certainty of investor buyers over the potentially higher but less certain returns from occupant buyers.

Zezas notes that companies sometimes default to speed when they actually have timing flexibility, potentially sacrificing significant value for unnecessary urgency. Others hold out for premium pricing when their financial situation demands rapid capital deployment, creating opportunity costs that exceed the potential valuation gains.

The Broader Valuation Spectrum  

While Zezas focuses on three primary buyer types in this episode, he reveals that properties can actually have up to 13 different simultaneous valuations depending on buyer objectives, financing structures, and intended uses. The valuation spectrum can vary by 50% or more for the same property on the same day, even among sophisticated, well-advised buyers with access to identical market information.

This variation occurs because each buyer type operates under different business models, faces different costs and risks, and has different return requirements. Understanding this reality changes how CFOs should approach real estate transactions entirely.

Making Informed Real Estate Decisions  

The revelation that your company's property has multiple simultaneous values fundamentally changes how finance executives should approach real estate transactions. Rather than simply asking "What's my building worth?" the more appropriate question becomes "Which buyer type aligns best with our strategic objectives?"

As Zezas emphasizes, the key to success lies in proper preparation before taking properties to market. "Make sure you understand what you're offering and what the likelihood of achieving your goals are before you take your property to market," he advises.

By understanding the different valuation models employed by corporate occupants, investor landlords, and sale-leaseback investors, finance executives can make more informed decisions that optimize both property value and transaction timing. This knowledge allows companies to extract maximum value from real estate assets while supporting broader corporate objectives.

For additional guidance on navigating complex property transactions, Andrew Zezas can be reached at andrew.zezas@CFOIntell.com through Real Estate Strategies Corporation.