Selling a warehousing and distribution centre in Canada

An owner who has decided to sell a warehousing and distribution centre has a sequence to work through, and the order matters. The building comes first: either title, or a lease the buyer must be able to take over. Next are the licences and inspections tied to equipment on the site, then the client agreements that produce the revenue, then the financial package a buyer reads. Last are the filings that depend on who the buyer is. Starting with the item controlled by a third party, such as a landlord or a regulator, keeps the rest of the timetable honest and protects confidentiality when more people have to be told.

Start with the lease or the title

If the facility is leased, read the assignment clause first. In Ontario, section 23 of the Commercial Tenancies Act deems a covenant against assigning without licence or consent to be subject to a proviso that consent is not to be unreasonably withheld, unless the lease contains an express provision to the contrary. Other provinces have their own rules, and a lease can change the result, so confirm both. See can my landlord refuse to assign my lease. If you own the building, decide early whether it sells with the business.

Assets or shares changes the paperwork

Ask your lawyer early whether the sale will be of assets or of shares, because that choice decides which contracts, licences and permits must be assigned, reissued or left alone. If the buyer takes only selected assets, the lease, each client agreement and each equipment licence needs its own path to the buyer. If the buyer takes the company, ask your lawyer which contracts and licences stay with it and what liabilities come with it. Ask your accountant about the tax effects of each structure before price talks begin. Asset sale or share sale sets out the trade-offs.

Licences that will not simply move across

Fuel installations, pressure vessels or elevating devices on site may sit under a provincial technical-safety body. In Ontario, the Technical Standards and Safety Authority states that its licences are not transferable and that the onus to apply for a new licence falls on the new owner. Other provinces have equivalent bodies with their own rules. List every licence, certificate and inspection the site holds, find which body issues each and ask what a change of ownership requires. Confirm before closing that the buyer will be able to operate from the first day, because a licence issue found late can hold up the closing.

Prepare the financial package

BDC notes that buyers ask to see historic and interim financial statements, projections and tax returns, and that sellers should review contracts, leases and business agreements and update them where needed. For this sub-sector, add a clear split between operating results and building costs, and a view of occupancy by client. If the building is held outside the operating company, show what rent an outside landlord would charge. Explain any one-time costs and owner-related spending in the statements, so a buyer’s adviser does not have to guess.

Client agreements and confidentiality

Read every storage and handling agreement for change-of-control, assignment and termination terms before a buyer does. Decide when each client learns of the sale. Clients whose goods sit in your building may care who runs it, so decide who is told, and when, before word gets out. Use a confidentiality agreement with every prospective buyer and limit client names in early materials. Ask whether the buyer needs to speak to the landlord or to clients before closing, and agree how and when that happens, so the introduction is on your terms rather than discovered.

Filings that depend on the buyer

The Canada Revenue Agency publishes form GST44, used to elect that GST/HST not apply to the sale of a business or part of a business. The Competition Bureau explains that Part IX of the Competition Act requires notification of certain transactions that are of a specified type, exceed certain thresholds and are not exempt. The Investment Canada Act applies to non-Canadians who acquire control of a Canadian business. Ask your accountant and lawyer which, if any, apply.

What to have ready

Assemble these before a serious buyer asks:

• The lease, any amendments and correspondence with the landlord, or the title and survey if you own the building.
• Every client storage and handling agreement, with termination and change-of-control terms flagged.
• An equipment list that shows what is owned, leased or financed, with the lender for each.
• Licences, inspection reports and occupancy records, with the issuing body for each.
• Recent condition and environmental reports on the building, if you hold them.