Commercial property often passes through families. A parent buys a strip center, then a warehouse, then the building the family business runs from. Decades later, the next generation inherits the buildings along with the leases, the loans and a drawer of paper.
What follows is rarely a single decision. Who keeps which building? Who wants out? Who runs things day to day? Those questions are hard enough. They get much harder when each person in the room carries a different number in their head.
This article is about settling those numbers first. It is not about wills, trusts, entity agreements or estate taxes. Those belong to your attorney and your CPA, and Clover State does not give legal or tax advice.
Why the numbers come first
In most families, everyone has a number. One sibling remembers what the building cost. Another heard a figure from a broker at a holiday dinner. A third looks at the rent and does the math in their head.
None of those numbers is wrong on purpose. But without one shared set, the conversation becomes an argument about whose number is right, and the real questions wait. Settle value, debt and income first, from documents, and the family can spend its energy on what it wants to do.
Five numbers per building
For each property, the family needs the same five facts on one page:
- Value: a range and a point estimate, with the reasoning shown.
- Debt: the loan balance, rate, maturity date and who signed for it.
- Income: net operating income (NOI, rent left after operating expenses) from the last twelve months.
- Lease roll: when each lease ends, and what options tenants hold.
- Capital needs: roof, parking, mechanical and other work due in the next few years.
Alongside those, someone needs to confirm who holds title and through which entity. That is a document question for your attorney, and it often turns up surprises.
When an appraisal is required
Some uses of a value need a licensed appraisal. Many court and estate matters fall into that group, and a lender will have its own rules. Your attorney or CPA will know whether your situation does.
Clover State provides opinions of value and consulting reports, not appraisals. They suit the family’s own planning: deciding who keeps what, whether to sell, and what a buyout might look like. Where a licensed appraisal is required, we say so plainly, and we can scope the question and coordinate a licensed appraiser.
Three siblings, three buildings
Take a hypothetical family with three siblings and three buildings in Cheyenne and Greeley. The figures are illustrative.
| Property | Value | Loan | Equity | NOI |
|---|---|---|---|---|
| Strip center, north Cheyenne, 12,000 sq ft | $1,400,000 | $500,000 | $900,000 | $112,000 |
| Warehouse, Greeley, 20,000 sq ft | $1,100,000 | none | $1,100,000 | $88,000 |
| Shop used by the family business, Cheyenne, 6,000 sq ft | $600,000 | none | $600,000 | none (no lease) |
| Total | $3,100,000 | $500,000 | $2,600,000 |
Total equity is $3,100,000 − $500,000 = $2,600,000. One third of that is about $866,700.
Three things show up once the table exists.
Equity is not value. The strip center has the highest value, but the warehouse has the most equity, because it carries no loan. A sibling who wants “the biggest building” needs to say which measure they mean.
One building is uncertain. Two of the strip center’s leases end next year. Until they are settled, an honest value range might run from $1,250,000 to $1,450,000, depending on whether the tenants renew, so equity runs from $750,000 to $950,000. That spread is worth settling before anyone trades buildings.
One building has no income on paper. The family business uses the shop without a lease. Its value depends on what it would rent for to an outside tenant, and whether to put a written lease in place is a question for your attorney and CPA.
If one sibling wants the warehouse outright, it is worth $1,100,000 in equity against a one-third share of about $866,700. The gap is about $233,300. How to close it, and whether to divide the buildings at all, is the family’s decision with its attorney. The table’s only job is that everyone argues from the same numbers.
Income, not just value
Value is what a building is worth on the day it is priced. Income is what it pays the family every year it is kept. Both matter, and siblings often weigh them differently.
In the example, the warehouse earns $88,000 on $1,100,000 of equity, about 8.0% a year. Suppose the strip center’s loan payments are $42,000 a year. It then pays $112,000 − $42,000 = $70,000 on $900,000 of equity, about 7.8%. Close on paper, but one has a single long lease and the other has two leases ending next year. A sibling who needs steady income and one who wants to sell soon may each prefer a different building, for good reasons.
Decide who runs what
Numbers settle the value question. They do not settle who makes decisions next month. Before the family moves on, agree in writing on:
- Who approves leases, renewals and large repairs
- Who reads the monthly reports from the property manager
- Who signs, and who is personally on the hook for each loan
- How often the family meets to review the buildings
- How a family member who wants out can raise it, and how the price is set
The legal form of those agreements belongs to your attorney. The habit of writing them down belongs to the family.
Shortcuts that cause trouble
Settling the numbers well is mostly avoiding a few common shortcuts.
- Using the purchase price. What a building cost decades ago says little about its value now.
- Using the county’s figure as the market value. The value on a tax notice is the county’s estimate for tax, not a buyer’s offer.
- Splitting by square feet. A square foot of leased retail and a square foot of empty warehouse are not worth the same.
- Ignoring lease dates. A building with every lease ending next year is worth less to a new owner than its rent suggests.
- Ignoring deferred work. A roof due next year is a cost someone inherits.
- Waiting too long. The calmest time to settle numbers is while the person who knows the buildings can still answer questions.
A checklist for the family meeting
Bring these to the table, one folder per building:
- Deeds and entity documents (for your attorney to confirm ownership)
- Every lease, amendment and side letter, and a current rent roll
- The trailing twelve months of income and expense
- Loan documents and the latest statement
- The latest property tax notice and insurance declarations
- A list of capital work done and work known to be due
- The property manager’s agreement and recent reports
- A list of questions for your attorney and a separate list for your CPA
Our document checklist shows what each kind of review needs and where owners usually find each item.
Questions to take to advisors
The numbers will raise questions that only licensed advisors should answer. Write them down as they come up, so each meeting with an advisor is short and specific.
For your attorney:
- Who holds title to each building today, and through which entity?
- What do the entity documents or estate plan say about transfers and buyouts?
- Do any loans or leases limit a change in ownership?
For your CPA:
- What are the tax consequences of keeping, selling or transferring each building?
- Does the timing of a sale or a transfer change the answer?
- Which records from each property does the CPA need, and for which years?
Bring the five numbers per building to both meetings. Advisors answer faster when the facts are already on one page.
Where Clover State helps
Our page for family and estate holdings describes how we work with families. Two programs carry most of the work.
The portfolio health check sets the shared fact base for up to five properties: a value range, the lease roll, debt maturity, tax class and notice dates, scored per property. It is from $2,500 in 15 business days.
Where the family needs a defended number for one building, the valuation advisory report adds a site visit, the valuation approaches that fit and a sensitivity table, from $3,500 per property in 10 to 15 business days. Both are read by a second person before they leave the office. We are independent of every family member and earn nothing from any outcome, so the numbers take nobody’s side. Fees are on the pricing page.
Start with the numbers
If your family is beginning this conversation, settle the facts before the feelings take over. Book a free 30-minute scoping call and we will tell you whether a portfolio health check or a valuation advisory report fits your buildings, what it costs and when the family would have the numbers in hand.
