Businesses could consider selling non core real estate assets: Report

Businesses could evaluate the possibility of sale of non- core real estate to raise immediate financing, due to the ongoing economic conditions, says a report by Ernst & Young.

The report also says that valuation of such real estate assets, may be depressed from their peaks.

“However, businesses will need to evaluate the cost of capital versus potential valuation upside on such real estate assets, which have been non-core,” it said.

According to the analysis done by EY India, in response to COVID-19, businesses around the world are looking at options to raise capital.

“Many business owners (private sector, public sector and public listed) have traditionally owned their real estate. These typically include factory operations coupled with offices and warehouses. While, in some cases, the real estate may have become non-core, in other cases such real estate is essential for the business operations,” the report said.

During economic down-cycles, it becomes important for corporations to unlock their capital and invest in core operations and for potential business opportunities in their core sectors.

According to EY, two key solutions that can be considered are- sale and leaseback of real estate assets and sale of non-core real estate.