16 April 2018

 

Upon the completion of building construction, the user can buy or lease it from the developer. Although for the majority of companies it is more advantageous to sign a lease agreement, there are also firms on the market for whom buying the building is an interesting option.

Built-to-own

Built-to-own or BTO is a variant in which the ownership of the building is transferred to the user upon completion of construction. This option is not offered by all developers.

After securing all the necessary permissions, the developer always builds the building on its own land for a particular tenant customised to their specific needs. The relationship between the developer and the tenant is established in a contract for work setting forth the individual phases of the construction, their financing method and especially the details of the transfer of building ownership (an EPC contract between the client and the contractor in which the supplier guarantees the complete delivery of the work, including putting it into operation). Once the new owner takes over the building, they assume responsibility for the administration of the facility.
There are a variety of reasons firms prefer the BTO option. For example, the developer has land in a very attractive location with no free parcels available in the surrounding area, and the firm wants to have its hall precisely at this site. At the same time, ownership of the building is advantageous for the firm, as it has the long-term continuity of contracts or it has sufficient available resources for further development and can afford to invest in a new building. If the firm waited for a free parcel or looked for and arranged the purchase of another piece of land, they would lose a lot of valuable time.

Built-to-suit

With the built-to-suit or BTS option, the building remains in the ownership of the developer once construction is completed and the user pays rent. Thanks to its greater flexibility, this type of construction is the clear favourite on the Czech market.
At the end of the lease agreement, the tenant can decide if they want to stay in the building, move production, or even ask the developer to enlarge the facility, if possible. Example: the firm has a contract with a client for spare parts for five years, and hence it is advantageous for the firm to conclude a lease agreement for the same period. If the contract for the spare parts is not extended, the firm leaves the leased space and needn’t worry about finding a new owner.
But even in the case of built-to-suit, the tenant does not lose the possibility of modifying the leased facility (e.g. raising ceilings, increasing floor load, etc.). The tenant can pay the cost of these extra requirements either in a one-time cash payment or have them included in the lease (based on lease length per square metre). Additional advantages of a lease relationship are the possibility to use the developer’s fit-out contribution and building administration.

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