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Appraisal
Regardless of what you originally paid for
your shopping center and the cost of improvements you have made, the price your shopping center can command is what the market will bear at the time you decide to sell it. You may consider hiring an independent commercial real estate appraiser. An appraiser has specialized training and experience. Don't rely on assessed valuations made for tax purposes. Such valuations may not be reliable indicators of value as these valuations are made by mass appraisal techniques.
Comparative market analysis
Whether or not you get an appraisal, a real estate advisor can develop a comparative market analysis. This analysis will describe shopping centers in your area that have recently sold in the market. The analysis may compare specific features of your shopping center to others - the value of a corner lot, zoning, rent roll (tenants, rate per sq. ft, monthly income with CAM, deposits, lease terms, expenses, total net income and CAP rate) for example. The analysis may also point out market fluctuations caused by the opening of a new school, business or city variance, for example, as well as long-term trends.
If you do not have a good idea, based on reliable data, of what the price your shopping center can generate, you may decide to set a higher price thinking that if it doesn't sell at first, you can come down. However, if you set it too high, you may keep away buyers who are looking at comparable shopping centers with lower prices. Lowering the price later sometimes gives your shopping center a negative image. On the other hand, you don't want to set the price too low. You may be tempted to set a low price because you feel the pressure of transferring to another town, or you're afraid that your CAP rate will turn away buyers. Be realistic and get advice from your real estate advisor.
Net proceeds
Once you've decided on a price range, the real estate advisor may help you calculate an estimated amount you might net from the sale. If you have owned your shopping center for several years, you may have built up a sizable equity. Equity is the difference between the value of your shopping center and the balance on your mortgage After subtracting what you owe on your mortgage, ask your real estate advisor what costs you will incur in closing. These may include title fees, taxes, a penalty for prepaying your mortgage, brokerage commission, attorney fees, survey fees and charges for preparing and recording documents. Finally ask your tax adviser or attorney about the tax implications of your proposed sale.
