Sales Negotiations for Large-Scale Income Properties: The Real Reason Potential Buyers Say 'I'll Consider It' and Then Disappear
Every day, we receive consultations from owners of apartment buildings, income-generating properties, and hotels/inns, and we facilitate creditor-oriented voluntary sales between servicers (debt collection companies) and buyers.
In the practical field of large-scale transactions, there is a scene we see very often. It is the case where a potential buyer who finally appeared and said they would 'consider it positively' suddenly stops communicating after a while, and the negotiations come to a halt.
'Was the price too high after all?' The seller feels anxious about this. However, in practice, the reason buyers pull out is often not the 'price' itself.
The biggest cause is 'a lack of materials for making a decision (a deadlock in due diligence).'.
'Invisible risks' are the greatest enemy of price negotiations.
The sale of general residential properties is completely different from the sale of large-scale income properties or lodging facilities. Buyers are not just buying 'land and buildings.' They are extremely wary of the underlying profitability, contractual relationships, and 'risks that might explode after taking over'.
For example, in the inn and hotel cases I have seen in the past, the following types of materials were often not readily available.
Sales data showing recent occupancy rates, ADR (Average Daily Rate), and RevPAR
Repair history for expensive equipment (FF&E) such as boilers and air conditioning
Details of contracts with OTAs (Online Travel Agencies) and the status of business permits
From a buyer's perspective, when investing hundreds of millions of yen, not knowing 'the extent of equipment aging' or 'the basis for whether current sales will truly continue' is nothing but terrifying. In business, all uncertainties are estimated in the 'worst-case (conservative)' scenario. As a result, repair risks and the like are excessively deducted, leading to significant price reduction requests, or the negotiations themselves disappear with the buyer saying, 'I'll pass because I can't see the risks'.
Creditors (servicers) are also looking at the 'materials'.
Furthermore, in the field of voluntary sales, there is another high wall called 'creditor consent'.
In discussions with servicers and guarantee companies, simply conveying your hope that 'I want to sell at this price' will not move things forward. While the acquisition price and collection targets of the debt cannot be determined from the outside, in practice, they are strictly looking at 'collateral valuation,' 'expected recovery and time in the event of an auction,' 'economic rationality of the voluntary sale,' and 'whether this buyer can truly complete the payment (certainty)'.
If the buyer is sluggish due to a lack of materials (i.e., due diligence is not progressing), the creditor side also becomes suspicious, wondering if this deal will really come together, and the risk increases that they will proceed with auction procedures within the limited voluntary sale period.
Conversely, 'proactively and thoroughly organizing materials for both the buyer and the creditor' becomes the strongest weapon for advancing negotiations advantageously and maintaining the price.
The 'first step' I want to convey from practical experience.
In cases involving multiple creditors or the sale of long-established inns where materials have been scattered, I understand all too well the feeling of stopping because you 'don't know where to start'.
However, it is fine to organize the materials you 'have' and collect the missing ones in stages while coordinating with experts such as management companies and tax accountants. The biggest waste is to rush and try to find a buyer based only on 'verbal explanations,' only to lose credibility later.
To ensure it doesn't end with 'I'll consider it,' and to convince creditors of the rationality of the voluntary sale, please start by laying out the documents regarding rights and recent earnings data you have on hand on your desk.
■ For Business Owners and Property Owners Who Want to Know More About the 'Behind-the-Scenes of Practice'
Regarding the voluntary sale of large income-generating properties involving multiple mortgages or servicers, as discussed in this article, we provide more specific details such as a 'Document List Required for Buyer Due Diligence' and a 'Roadmap to Keep Negotiations Moving' in the practical columns on our official website.
Additionally, for those who wish to organize their company's situation before consulting with us, we have prepared materials that include a checklist packed with field-tested know-how.
👉 For Business Owners: Guidebook for Selling Entire Buildings, Ryokans, and Hotels (Free Download. Please proceed from the column page.)
*To maintain confidentiality and protect individual cases, the examples in the columns have been reconstructed with property names and other details omitted. *Voluntary sales and mortgage cancellations cannot always be guaranteed. Results vary depending on creditor consent and individual circumstances. Issues requiring expert judgment will be handled in coordination with lawyers, judicial scriveners, and other professionals.
■ About the Author
Masayuki Tsutsumi Representative Director, Japan Realtor Co., Ltd.
Entered the real estate industry at age 20, became independent at 33, and established Japan Realtor Co., Ltd. Now in his 21st year in the real estate industry, he has accumulated over 1,000 successful transactions to date.
He primarily stands at the forefront of the revitalization and operation of entire income-generating properties, ryokans, and hotels, as well as real estate sales (voluntary sales) that involve tough negotiations with servicers (debt collection companies). Since around 2015, he has also handled numerous real estate transactions for overseas investors, including conducting real estate investment seminars in China.
In addition to having a 'former servicer executive' as an advisor, he has built a robust cooperative system with lawyers, tax accountants, judicial scriveners, and others. He specializes in organizing and resolving complex rights issues and matters requiring expert verification—such as multiple mortgages, attachments, and mortgage cancellations—through a single point of contact.
・Book: 'Profitable Upstream Property Investment' (Supervisor)
・Qualifications: Certified Memento Organizer / Vacant House Consultant, etc.
[Japan Realtor Co., Ltd.]
NS Building 3F, 1-32-4 Shinjuku, Shinjuku-ku, Tokyo 160-0022
Tokyo Governor License (2) No. 104145
Official Website: https://japanrealtor.jp/