The Hidden Cost of Corporate Real Estate: Why the Wrong Structure Can Cost Hundreds of Millions

For many Hungarian businesses, real estate is a symbol of stability. An office, business premises, a production hall, a warehouse or development land that once seemed like a good opportunity: over the years, these assets naturally become part of the company's asset base.

The problem usually does not become apparent when these assets are acquired, but when the company reaches a turning point. During a generational transition, a capital raise, an acquisition or the sale of the company, it can quickly become clear that what the owner regards as a valuable asset is not necessarily part of what an investor wants to acquire.

Real estate does not always increase company value

A business owner understandably tends to add together the value of the operating business and the properties held by the company. A potential buyer, however, looks at the situation from a different perspective.

The buyer primarily assesses the earnings generated by the business, the sustainability of its operations, its cash flow and its growth prospects. A property that is not required for those operations can easily fall outside this logic.

In some cases, it can even make the transaction more difficult. It may tie up capital, complicate the interpretation of certain financial metrics, or simply add an asset to the package that the buyer does not need. In such situations, the investor will often not pay full value for the property, but will instead factor it in at a discount.

The hidden value often lies not in the property, but in the decision

Active asset management is becoming increasingly important in the real estate market. The value of a property is not determined solely by its location, floor area or current market price. Equally important is the role the asset plays within the owner's overall portfolio. This is particularly relevant when it comes to corporate real estate holdings.

An operating site may be essential to the business. Another property, however, may be a standalone investment. A vacant site may represent a development opportunity, while an underutilised warehouse may simply represent tied-up capital. If these assets are treated as a single pool of property, their underlying potential can easily be lost. True value creation therefore often begins by asking a separate question about each asset: What is the best place and role for this property over the next five to ten years?

Delaying action can be particularly costly ahead of a company sale

Timing is critical when preparing a transaction. If the real estate portfolio is only addressed once a potential buyer is already conducting due diligence on the company, the owner's room for manoeuvre becomes significantly more limited. At that stage, it is much harder to establish a new structure, find a separate buyer for a property, explore development opportunities or put a long-term lease arrangement in place. Decisions are also often driven by the time pressure of the transaction itself. Reviewing the corporate real estate portfolio should therefore not be the final step in a company sale; ideally, it should be one of the first preparatory tasks.

The question is not whether to hold or sell

A corporate real estate strategy is not a binary choice. Not every asset should be sold, and not every property should remain in the operating company. In some cases, separating the real estate creates the greatest flexibility. The property can be transferred into a separate ownership structure while the operating company continues to use it under a long-term lease. In other cases, a sale may be the better solution because it releases tied-up capital. A development project, change of use or new leasing strategy may also materially increase the value of an asset. The right decision always comes from considering the company, the property and the owners' objectives together.

The real estate portfolio should be managed just like the business itself

A significant proportion of Hungarian SMEs operate their core businesses with outstanding expertise. However, they rarely have a dedicated internal team for the strategic management of their real estate. A manufacturing company is not expected to analyse property yields, development alternatives, leasing strategies or transaction structures on a daily basis. As the accumulated real estate portfolio grows, however, a point may be reached where intuitive management is no longer sufficient. This is when a comprehensive view becomes necessary.

• Which assets generate an adequate return?
• Where is there untapped development potential?
• Which properties genuinely support the core business?
• Where is capital tied up that could create greater value elsewhere?

The first step is not a sale, but a portfolio review

The starting point of a professional real estate strategy is therefore not a sales listing, but a comprehensive review of the portfolio. Valuation is only one part of this process. Equally important are the use of the properties, the cost structure, the legal and ownership position, development opportunities and the company's longer-term objectives. Only then can it be determined whether holding, developing, optimising the use of, separating or selling a particular property will create the most value.

Real estate assets are more than a line item on the balance sheet

In the coming years, many Hungarian companies may find themselves having to reconsider their ownership, financing or operating structures. Ahead of a generational transition, capital raise, growth phase or exit, the role of corporate real estate becomes particularly important. The question is not simply how much these assets are worth, but whether they are creating the greatest possible value in their current structure.

At REMAX GO, we believe that real estate assets should be managed as part of the broader corporate strategy. The right structure, active asset management and timely decisions can do more than improve property performance. They can also fundamentally influence the success of a future transaction.

Could there also be hidden value on your company's balance sheet?

A property may look like a stable asset today, but ahead of a generational transition, capital raise or company sale, its role can change completely. It is worth recognising this before a potential buyer is the one to raise the question.

A REMAX GO portfolio audit identifies untapped opportunities, capital that can be released and risks that could complicate future transactions.

If your company owns a significant real estate portfolio, let us look together at how you can get the most out of it. Contact us: www.remaxgo.hu