Counseling Clients on a Commercial Real Estate Exit Strategy

Contributing Author: James “Jay” Verro, CCIM

The longer that you’re in the commercial real estate (CRE) industry, the probability increases that you’ll have clients or will be contacted by prospective clients who will want / need your expertise on their CRE exit strategy. To best advise your clients, you’ll need extensive knowledge on the options available while managing to “Staying in your Lane” with regards to your licensing. Simply put, refer your clients to their attorney for legal advice, their CPA for tax implications, and so on.

You’ve been asked to sell an income producing property by a property owner or client. Aside from determining market value, gathering the necessary due diligence information, and other commercial real estate related tasks, an experienced CRE professional will have a discussion with the seller about their post-sale plans. 

One of the biggest concerns to your client is taxes. Selling investment properties has tax implications, such as Capital Gains and Recapture that affect the seller’s net proceeds. The best initial advice to provide to the seller is to have them speak to their CPA or Accountant to determine three things: 

  1. What is their current basis in the property?
  2. How much debt is still owed on the property?
  3. If the property sold at asking price, how much would they owe in Capital Gains?

Having the above information is a benchmark to compare all other options for the property owner. Next, would be a conversation regarding the seller’s short- and long-term goals such as:

  • Whether they want to remain a CRE investor?
  • Is their preference for a hands-on property or become a passive investor?
  • Do they need the money for something else, i.e. health expenses, retirement, etc.
  • What is their tolerance for risk?
  • Are they adverse to taking on more debt?

The above knowledge is essential for an experienced CRE professional to counsel their seller on options available to them based on their specific needs and objectives. Options available to sellers include:

  • Simply pay their Capital Gains Tax and move on.
  • Do a 1031 Like Kind Exchange to defer payment of capital gains. This option isn’t necessarily the right option for some. Case in point, a client who is selling to retire and no longer has the desire to take on debt. 
  • Delaware Statutory Trust (DST) allows sellers to defer capital gains through buying a fractional share of a sponsored property or portfolio. While this is a great option for some sellers, others may not welcome the idea of not being in control of their property and taking a passive investment role.
  • Invest into an Opportunity Zone to defer capital gains. This relatively new option has garnered the attention of many financial folks who have been raising capital to invest. This is very much a specialty that most CRE professional should seek guidance and information on, as even the tax code isn’t crystal clear yet on aspects of the program. 
  • In advance of the sale of the current property, a seller of a free and clear property or one in which they can pay off loan obligations may consider a Charitable Remainder (CRT) as an alternative to capital gains tax.

Obtaining CRE industry specific education through organizations like the CCIM Institute or SIOR are key to being able to offer the widest range of expertise to your seller clients. NAI Platform has multiple CCIM and SIOR designees with decades of experience in all property types.

For more information and expert guidance on your commercial real estate needs, please give us a call at NAI Platform or visit our website at

James “Jay” Verro, CCIM

Associate Real Estate Broker

NAI Platform

14 Corporate Woods Blvd.

Albany, NY 12211

Direct: 518-465-1400 Ext: 214

Fax: 518 465 1441

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