Buying a business for its land

Purchasing a business that has land with the potential for development is an attractive prospect for many business owners and developers.

Whether you’re in the property development business, the hospitality sector, the agricultural sector, or are simply looking for land on which to expand your existing business, buying a business with land can often make more sense than buying just land. However, before developing the land, buyers will need to go through the same processes, such as undertaking a land survey and obtaining planning permission, as they would if they had simply bought a patch of land.

The advantages lie in the potential to add operations and activities that complement an existing business, or to buy a struggling business and start from scratch with the development of a fresh new premises in a great location.

Define your requirements and keep an open mind
It’s quite rare that an entrepreneur would set out specifically to buy a business with land on which to develop - they are more likely to simply look for a patch of land to buy. However, expanding your search to include businesses with land could help you to find land that better fits your criteria.

Consider the ideal location, size and characteristics of the land you require before embarking on your search and have a clear idea of the price you want to pay. If, for example, you are looking for a beautiful patch of land in a tourist hotspot on which to launch a new ‘glamping’ campsite, purchasing a hotel with grounds may be your best option. You could operate the two in tandem, complementing each other perfectly and driving more bookings. Alternatively, you could close up the hotel and focus on the campsite - instead using the buildings for staff or owner accommodation.

Other sources of land via business purchases, can include farms, garden centres, care homes and even manufacturing and engineering sites. Including a search for businesses with land in your land-buying process will open up a vast number of options to you that you may not have previously considered.

Garden centres are a good example of how property can be repurposed resulting in a net gain in valuation. A garden centre business near the Pembrokeshire Coast National Park was put up for sale in 2013. In addition to the nursery area, the property came with car park, a coffee shop, an acre of glass houses, and approximately 3.6 acres of meadow. The glass houses were not in the best state of repair and did not contribute much to profitability. Permission has since been granted for the new owners to demolish the glass houses and build a luxury lodge village. Considering the prime location for tourists and the fact that a functioning coffee shop already existed, this is a far more effective and potentially profitable use of the land.

Appointing a qualified land surveyor to perform a thorough survey of a business’s land is one of the most important stages in the due diligence process involved with buying a business for its land. You’ll need to assess a variety of factors, such as whether there is a flood risk, if there are overhead cables running through the land and if there are public or private rights of way. The surveyor will also be able to advise you on whether your plans are feasible on the land in question and will perform an environmental impact assessment.

If you are given the go-ahead by the surveyor, you may then want to think about seeking planning permission for any developments you wish to undertake on the land. This might take place before or after you buy the business. In some cases, you may be able to purchase a business with land that already holds planning permission. Alternatively, whether you can obtain planning permission may be one of the main factors in your decision as to whether to buy a business for its land.

It is often easier and simpler to obtain planning permission to knock down an existing building and construct a new one on the same site as the precedent for development has already been set. Developing greenfield land is a much more difficult prospect from a planning perspective, although the decision will be based on a number of factors and you may be able to garner more favour with planning officials if you involve them in the process from the outset.

Opportunities abound
For buyers who do find themselves purchasing a business with plenty of land on which to develop, the opportunities can be exceptional. The owners of the £30 million Lifehouse Spa in Thorpe have recently revealed plans to build 200 houses, holiday homes and business units on the land surrounding the spa.

Co-owner and chief executive of the Lifehouse Spa, Peter Murphy, who along with his business partners bought the business out of administration four years ago, explained: “Our exciting masterplan will not only help deliver Tendring Council’s housing and regeneration but also considers carefully what will work in our unique setting and ensures the Lifehouse business can maintain that setting in the longer term.”

Buyers targeting businesses with land are often property developers, such as Robert Hitchins Ltd., which has ploughed cash into the Castlegate Business Park in Caldicot, Monmouthshire. The developer has attracted a number of major businesses to the site by providing offices, warehouses and research and development accommodation. They are now developing the land even further with the addition of a new retail and pub project to enhance the facilities available to those working on the business park.

“The new units will make good use of under-utilised land. They will create a more community feel and represent a sustainable development providing economic growth,” explained a spokesperson for Robert Hitchins Ltd.

The pub sector warrants special consideration as it has been in steady decline for over thirty years. Combine this with the rapid rise of UK house prices - over 50 per cent in the last five years - to create an environment where buying distressed pubs to convert into houses or apartments has almost become a sport.

To make a success of buying a business for its land and developing a business on that land, buyers will need to use a combination of skills. Seeing the potential in a piece of land isn’t something that comes easily and will take some imagination. Buyers will also need the patience of a saint as well as communication and diplomacy skills to liaise effectively with council planning officials, investors, developers and construction workers.

It’s also about having the creativity and tenacity to thoroughly examine a potential freehold business acquisition in a lateral manner - being ready and able to repurpose or sell off some or all of the land assets in a way that may not be immediately apparent to other potential buyers or indeed the vendor.

If everything falls into place and you find that perfect piece of land for your business idea, then it really feels great to make something from nothing.

Search for a business with land

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