5 ms·

That is quite common in retail. Usually the family owns all the stores and just rent them to the retailer. (At least in Brazil) Although it sounds bad, not sur

That is quite common in retail. Usually the family owns all the stores and just rent them to the retailer. (At least in Brazil) Although it sounds bad, not sure how it is perceived in real estate

andrejuseu 8y ago
Same in Lithuania, not a problem, if price for renting is like market price, else, it would be interesting to local authorities.
- mosselman 8y ago
  How is this not a problem? There is a huge conflict of interest in decisions about location, rent negotiations, etc.
  - yani 8y ago
    Is conflict of interest illegal?
    - deleted 8y ago
      [deleted]
    - mosselman 8y ago
      I said 'problem', not 'illegal'. Other shareholders/boards/investors/employees should care.
  - verganileonardo 8y ago
    Rent should be similar to market price for the region. Regarding location, the family wants the store to the be sucessfull for 2 reasons: (1) the rent period is going to be longer and (2) they own the retailer and want to invest in viable stores!
    - conanbatt 8y ago
      If rent were the same, then it wouldnt happen as often, because any slightly better deal will make the owner of the property lose out. Rent on self-owned is definitely higher than market price. It has to be for the transaction to make sense.
  - andrejuseu 8y ago
    As somebody mentioned, if you own a building as a shareholder in new company, and you have more shareholders (not one shareholder), you can buy rent from it as long as price is in market. Company rents office from other company, you can have as many companies as you want.
    - code4tee 8y ago
      You are thinking about tax issues not issues of fiduciary duty. The market value issue is to make sure you’re not illegally funneling money between entities without proper taxation. You generally couldn’t, for example, transfer significant wealth to a friend without high taxes by selling them something for a dollar When it’s market value is $10 million. This issue here is completely different.
fastbeef 8y ago
Apparently this is McDonald’s modus operandi as well. They’re basically a real estate company who happens to specialize in fast food resturants.
- sjcsjc 8y ago
  Are you sure? Surely the company itself owns the properties, which is very very different from a controlling family owning the properties.
  - arthurcolle 8y ago
    No, they don't own the properties outright. McDonalds operates as a franchise
    - deleted 8y ago
      [deleted]
    - kgwgk 8y ago
      From their annual report: "The Company owns and leases real estate primarily in connection with its restaurant business. The Company identifies and develops sites that offer convenience to customers and long-term sales and profit potential to the Company. To assess potential, the Company analyzes traffic and walking patterns, census data and other relevant data. The Company’s experience and access to advanced technology aid in evaluating this information. The Company generally owns the land and building or secures long-term leases for conventional franchised and Company-operated restaurant sites, which ensures long-term occupancy rights and helps control related costs." "The Company owned 45% to 50% of the land and 70% to 75% of the buildings for restaurants in its consolidated markets at year-end 2017 and 2016."
  - dahdum 8y ago
    80% of McDonalds are franchise, so it’s often a similar situation. 2/3rds of locations are owned by McDonald’s and leased by the franchisee, who also pays royalties and purchases from corporate affiliated suppliers. Ripe for abuse if McDonald’s were too short term focused. Source: https://www.fool.com/investing/general/2016/04/03/what-percentage-of-mcdonalds-restaurants-are-owned.aspx https://www.fool.com/investing/general/2016/04/03/what-perce...

That is quite common in retail. Usually the family owns all the stores and just rent them to the retailer. (At least in Brazil) Although it sounds bad, not sure how it is perceived in real estate

andrejuseu 8y ago

Same in Lithuania, not a problem, if price for renting is like market price, else, it would be interesting to local authorities.

mosselman 8y ago
How is this not a problem? There is a huge conflict of interest in decisions about location, rent negotiations, etc.
- yani 8y ago
  Is conflict of interest illegal?
  - deleted 8y ago
    [deleted]
  - mosselman 8y ago
    I said 'problem', not 'illegal'. Other shareholders/boards/investors/employees should care.
- verganileonardo 8y ago
  Rent should be similar to market price for the region. Regarding location, the family wants the store to the be sucessfull for 2 reasons: (1) the rent period is going to be longer and (2) they own the retailer and want to invest in viable stores!
  - conanbatt 8y ago
    If rent were the same, then it wouldnt happen as often, because any slightly better deal will make the owner of the property lose out. Rent on self-owned is definitely higher than market price. It has to be for the transaction to make sense.
- andrejuseu 8y ago
  As somebody mentioned, if you own a building as a shareholder in new company, and you have more shareholders (not one shareholder), you can buy rent from it as long as price is in market. Company rents office from other company, you can have as many companies as you want.
  - code4tee 8y ago
    You are thinking about tax issues not issues of fiduciary duty. The market value issue is to make sure you’re not illegally funneling money between entities without proper taxation. You generally couldn’t, for example, transfer significant wealth to a friend without high taxes by selling them something for a dollar When it’s market value is $10 million. This issue here is completely different.

fastbeef 8y ago

Apparently this is McDonald’s modus operandi as well. They’re basically a real estate company who happens to specialize in fast food resturants.

sjcsjc 8y ago
Are you sure? Surely the company itself owns the properties, which is very very different from a controlling family owning the properties.
- arthurcolle 8y ago
  No, they don't own the properties outright. McDonalds operates as a franchise
  - deleted 8y ago
    [deleted]
  - kgwgk 8y ago
    From their annual report: "The Company owns and leases real estate primarily in connection with its restaurant business. The Company identifies and develops sites that offer convenience to customers and long-term sales and profit potential to the Company. To assess potential, the Company analyzes traffic and walking patterns, census data and other relevant data. The Company’s experience and access to advanced technology aid in evaluating this information. The Company generally owns the land and building or secures long-term leases for conventional franchised and Company-operated restaurant sites, which ensures long-term occupancy rights and helps control related costs." "The Company owned 45% to 50% of the land and 70% to 75% of the buildings for restaurants in its consolidated markets at year-end 2017 and 2016."
- dahdum 8y ago
  80% of McDonalds are franchise, so it’s often a similar situation. 2/3rds of locations are owned by McDonald’s and leased by the franchisee, who also pays royalties and purchases from corporate affiliated suppliers. Ripe for abuse if McDonald’s were too short term focused. Source: https://www.fool.com/investing/general/2016/04/03/what-percentage-of-mcdonalds-restaurants-are-owned.aspx https://www.fool.com/investing/general/2016/04/03/what-perce...