Linda Harley Happy New Year, after a great summer we are looking forward to what the 2024 year delivers for the ECE sector.
In some recent appraisals and sales, we have noted a range of challenges around leases, in particular, shorter durations being available for a new owner so I felt it valuable to provide some insight on this.
When selling a Childcare business, the length of lease is an important consideration for the buyer and their advisors. As the ECE business relies heavily on the location and associated MOE License and resource Consent, buyers need a significant amount of time left on the lease to have security of tenure and time to recoup their investment.
As a rule of thumb, we tend to recommend the lease should have at least 10 years of tenure remaining when selling. Any less than this will impact the potential market value of the business and in some cases, the ability to sell the business.
If the lease is not long enough, discussing the possibility of a lease transfer or extension is essential. Some landlords may be open to negotiation of a new lease or extending the existing one with further rights of renewal to make the business more attractive to buyers and secure their own investment. Knowing the landlord’s position before going to market will provide a more seamless sales process for all parties and optimise the potential sale value.
I can provide valuable insights and guidance tailored to your specific situation and local market conditions. Feel free to get in touch to explore this topic further.
