Navigating the real estate procurement or disposition process can oftentimes be difficult because of differences in the way transactions are managed market-to-market throughout the United States. Even more complicated can be the process of acquiring and disposing of properties in markets overseas.
The challenges of executing global real estate transactions are many. They include, but are not limited to:
* Even the basics of real estate terms or business practices are not consistent throughout the world. Standard lease terms such as the way deposits, insurance repairs, maintenance and tenant improvements are handled vary significantly from market to market.
* In some cases, corruption will influence the process. Knowing what to expect will help to insure your organization against the pitfalls of a corrupt business environment.
* Currency issues also enter the equation. The issue is not only about tracking exchange rates; rather, it is about negotiating the currency in which payments should be made and/or establishing a means to hedge against vast movements in exchange rates.
* The legal framework of the real estate transaction also varies greatly around the world. Issues such as “What constitutes a binding contract?” “Where does liability lie?” “What rights does a foreign company have in a particular market?” are examples of questions to be asked throughout the process.
* Unfortunately, the lack of control of an organization’s own local staff in a foreign country is oftentimes a detriment to an effective real estate process. it is crucial to set global corporate real estate procedures to ensure that all local business units follow corporate policy and are not making commitments and signing leases independently.
* Language and communication barriers are often overlooked. Documents will likely be drafted in the local language. Assembling a team that can translate documents and conversations reduces the potential for costly errors.
Differences in business practice, language, legal framework, the potential for corruption and numerous other issues can, however, be mitigated. Establishing the appropriate processes and procedures will guide your organization to a successful outcome.
It is also critical to perform adequate due diligence on each market before getting into the process. Finally, be sure to place the proper internal and external individuals and service providers on your team. An organization shouldn’t assume that its local staff has the knowledge, skills and/or motivations to truly manage the process.
Brian Zurawski ([email protected]) is senior director of corporate advisory services for Summit Realty Group (www.SummitRealtyGroup.com), a member of the Cushman & Wakefield Alliance. He joined the firm in 1998 as a specialist in Industrial Corporate Services and also serves as Summit’s director of marketing and information services. Reach him at (317) 713-2121.
