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Buy or lease property for package brewery?

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  • Buy or lease property for package brewery?

    Any advice out there on which is better? Buy or lease the warehouse? I say buying, but I need more proof of why for investors...

  • #2
    financial situation

    If you have the cash/liquidity to buy, and the owner is willing to sell, and your getting a decent price and interest rates, I'm sure that's the way you want to go. Same with buying vs. renting a house.

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    • #3
      I agree with einhorn, but it is waaay easier to move belongings in and out of a house.(and we all know how much fun that is) A brewery, if your landlords decide to screw you, is not so easy to move. Big heavy equipment, not to mention all of the specific electrical, pipes, drains, glycol lines, compressors, augers....etc...etc.. that will have to be uninstalled, loaded, moved and reinstalled at your new location. Just the time involved in that could potentially force you to loose accounts. I guess it may be feasible if your doing well and expanding, but it's enough to break the bank of many growing breweries out there.

      Unless you can lease, and have an airtight contract with an option to buy... I say buy, buy, buy.
      Last edited by Jephro; 09-26-2008, 07:16 PM.
      Jeff Byrne

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      • #4
        Buy if you can afford; as has been said, installation costs and time are significant, and will probably kill a small operation if the loandlord screws you.

        Having said that, capital cost of buying may put you under similar strain from a different direction. You say investors - would they require more equity for the additional capital for buying?

        Best compromise would be a lease with option to purchase, or at the very least option to renew at market prices. Also need sub-let authority if you go bust. A good solicitor/lawyer is necessary cost in any arrangement.

        Gregg
        Gregg

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        • #5
          No doubt, buy it! The security your company will have from owning it's packaging facility cannot be outweighed. When, not if, your landlord raises the rent above what you can pay, uninstalling the plant could be a business-killer: remember, every year you're in operation, the physical plant gets integrated into the structure a little more. Also, if your company owns the property, it puts your company in a better position if you need to go to the bank or other investors down-stream for a capital infusion.

          Luck to ya'
          Prost!
          Dave
          Glacier Brewing Company
          406-883-2595
          info@glacierbrewing.com

          "who said what now?"

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          • #6
            Unless of course the current trends continue, and more and more businesses fold making the availability of commercial real estate far greater and creating a glut. We have all seen this in our lifetime. Right now, I think the best option is to lease w/a purchase option. There is a lot of real estate out there lying dormant in some very appealing areas for this type of endeavor. You could probably negotiate a sweetheart deal on rent/purchase option and watch the market carefully, if the business tanks nothing is lost. Even if you negotiate a deal w/a potential landlord/seller and the market tanks (a more likely scenario) you could go back to the drawing board and renegotiate a purchase.

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