Build-to-suit (BTS) transactions are a key strategy for businesses that require customized operational facilities. This approach involves constructing a new property, to be designed 100% to tenant specifications. Upon completion, the tenant enters into a long-term lease agreement at that location. BTS allows companies to optimize their operations and expand their footprint quickly, without large upfront capital investments.
Understanding Build-to-Suit Transactions
A build-to-suit begins with a tenant identifying specific requirements for a new location. These requirements are used to identify a target location, and then design and construct a building that precisely meets the tenant’s needs. Once these requirements are identified, there are two main ways to deliver the project:
Benefits of Build-to-Suit Transactions
The Importance of Utilizing an Advisor for Build-to-Suit Transactions
Build-to-suit financing is a sophisticated strategy to fuel business expansion, involving the construction of custom facilities to meet specific operational needs of a business. While the benefits of BTS, such as capital preservation, customization, and operational control are substantial, navigating these complex transactions requires expertise and precision in order to achieve the best outcome for the operator.
Engaging an experienced advisor is crucial to ensure these deals are executed seamlessly and efficiently, paying attention to all of the details. Advisors bring a deep understanding of market conditions, financial structuring, and legal intricacies, helping to negotiate favorable lease terms and secure optimal financing terms for the business. They also provide valuable insights as it relates to the unit-level financial projections and corporate considerations, ensuring that the final facility aligns perfectly with the company's strategic goals and will result in a win-win outcome for the operator and the sale leaseback investor. For example, Ascension Advisory recently secured $6.2M in build-to-suit financing for Dirty Dog’s Car Wash, demonstrating the transformative impact of expert guidance throughout these transactions. Reach out to the Ascension Advisory team to learn more about how a build-to-suit and sale leaseback can benefit your business.
Conclusion
Build-to-suit transactions are an invaluable yet underutilized strategy for business expansion, offering a unique blend of customization, efficiency, and financial flexibility. By enabling companies to design and construct facilities tailored to their specific operational needs without large upfront capital investments, BTS arrangements drive operational efficiency and support long-term growth for expanding operators. Whether through build-to-suit financing or forward takeout commitments, businesses can secure strategically located, custom-built properties that align perfectly with their goals and operational requirements. The stability of long-term leases, combined with capital preservation for the operator, makes BTS an attractive option for companies looking to grow their footprint and focus on their core business activities.