Grant Unsworth of UPL (Unsworth Properties Ltd) says when selling a property or a portfolio of properties, careful consideration should be given to setting an appropriate strategy for divestment. Relying solely on an agent to obtain best price on a disposal is not always the best option. Using the right agent/s and methods and ensuring that sale and purchase agreements are watertight often provide the most effective outcome for a client. UPL has sold down over $23m with valuations of $20.8m during the last 12 months for the Dairy Industry Superannuation Scheme Trustees Ltd, previously the Dairy Board Superannuation Scheme.

The Dairy Industry Superannuation Scheme portfolio provided a diverse and challenging selection of properties including two office buildings in Wellington and four properties in Auckland two of which were sold with vacant possession.

A number of different sales methods were adopted during the sell down taking into account the target market, expected level of competition, monetary size and complexity of the building.

This is designed to set definite time frames and to create ‘on the spot’ competition between interested parties. This method is very successful for lower priced investments that attract a wide audience and generally works well in a strong market.

Parties submit offers on a nominated date under terms set down in the tender documents. This method can often be intimidating for purchasers as there will usually be higher up front legal costs related to the tender documentation with no guarantee of success for the purchaser. This method is more suited for large value transactions like shopping centres and large office buildings that are more complex and have a number of tenancies.

The owner nominates a price (not in all cases) and conditions, which are acceptable, and negotiates with interested parties. This method is less onerous than a formal tender and allows the purchaser to deal with any party.

Prospective purchasers make offers on terms and conditions to suit them by a certain date and the vendor treats first with the best offer. This method is now widely used as it allows the purchasers to submit their own contracts with the comfort of knowing they will be treated first if their terms are most favourable.

When selecting an agent it is important to ensure that you are happy with the method of sale and the type of agency that you adopt. Agency fees are generally negotiable with the agency concerned and will vary according to the monetary size of the property and the complexity. Fees normally range between 1-2% (of the sale price).

Agency appointments can include; either using a single agency (sole agency) or combined (joint) or allowing any agent to submit offers through a general agency. An interesting variation to these methods adopted by the Dairy Industry Superannuation Scheme was the master agency.  This involved the appointment of a master agent to co ordinate offers through other agents with a separate fee being paid to the master agent and a set fee being paid to the successful introducing agent. This method worked particularly well in the sale of a Wellington property where there was strong investment demand in the market and utilised a number of the local agents to create a buying frenzy for investors to put their best foot forward. An informal tender process was adopted and the campaign that lasted 6 weeks drew 8 tenders including an unconditional contract. This method whilst not always popular with agencies keeps everyone focused and is suitable for markets where there is strong investment demand. The disadvantage of this method is that it involves a greater degree of input from the vendor but this is usually outweighed by a higher sale price. In this case the property in question sold $1m in excess of its valuation.

Preparation of a property for sale is vital and it is important that the vendor is aware of all aspects concerning the title, tenancies and building.

An audit should be undertaken which looks specifically at the leases for the property to ensure that there are no outstanding documentation issues in respect to rent reviews, lease renewals or any unusual arrangements in the leases.