Corporate barter

A solution for disposing of your bricks and mortar.

by Geoff Disston   The Texas commercial real estate market today is stagnant. For example, the Dallas office vacancy rate is among the worst in the United States at 20.7%, according to a study by the Staubach Co. This figure comes close to the peak vacancy rate of the last recession. Given the current economy and the anemic demand for office space, many companies in Texas have been left with excess real estate on their hands, which can be costly over time. But there’s a strategic business alternative they can adopt that can save them time and money, while offloading their excess space. It’s called corporate barter.

Corporate barter firms help companies recover higher value for their excess retail stores, manufacturing plants, and owned or leased office space by providing an alternative to liquidating or writing off property. In fact, an estimated 65% of Fortune 500 companies engage in barter to one degree or another.

Why barter?

Do you want to sell or sublease space at the low end of the market just to raise cash? If you answer yes, then take your lumps and sell low. However, if you do not need a fire sale to raise cash, but want to be rid of the property and recover its full value, barter is an excellent alternative.

If you barter a property, it can be taken off your hands in days, and, in exchange for the asset, you will receive a line of credit you can use to purchase goods and services your company routinely purchases anyway. This strategy frees up cash. Companies most often use their line of credit to purchase advertising time and space, printing and packaging services, or travel and accommodations.

When commercial real estate is sold to a corporate barter company and a line of trade credit is established, the barter company takes title of the property. Most reputable corporate barter companies will offer the minimum of contingencies and often with a cash component.

How to find a corporate barter firm

• Ask around. Find out if the corporate barter firm is known for its customer service and for delivering goods and services on time and as promised.
• Research their depth of knowledge and expertise. Corporate barter firms’ knowledge of specific sectors varies greatly. For example, not all firms have experience with commercial real estate. Also, find out how the firm intends to sell the asset and its history of dealing with similar assets.
• Decide what you want in exchange for your asset. In addition to trade credit only or blended solutions, which offer cash and credit in exchange for an asset, some firms are now offering cash-only investments. Depending on your company’s needs, this may be the right option.
• Ask for references–and call them. The best indicator of what a corporate barter firm can do for your company is what it has done for other companies.

Geoff Disston is vice president of real estate at ICON International, a specialized finance company engaged in corporate barter and other financial transactions. ICON’s clients include Tyson Foods, Mazda Motors, and Radio Shack. For more information, call 203/328-2300 or visit ICON-intl.com.

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