In a sale-leaseback transaction, an investor purchases a property currently owned and occupied by a user.
Simultaneous with the sale, the parties execute a lease whereby the user leases the property back from the investor.
If structured properly, these sale-leaseback transactions can provide excellent benefits to both the investor and the user.
Owners/users have used sale-leaseback transactions for decades to free up capital invested in real estate and convert it to alternative uses, primarily for their businesses. Property types that lend themselves to sale leasebacks are freestanding single-occupancy buildings (industrial warehouse/distribution, research and development facilities, corporate offices) and most types of retail.
Governmental entities also consider sale leasebacks for some of their facilities. Sale leasebacks can offer an alternative to conventional financing to raise capital. Conventional financing encumbers the real estate asset when listed as a primary liability on the balance sheet, whereas the lease from the sale leaseback, if structured as an operating lease, may be indicated as a footnote according to generally accepted accounting principles (GAAP).
Quite often, if the facility has been owned for a reasonably long period, the balance sheet can be improved. An asset at current book value is removed from the balance sheet and replaced by the cash that is raised from the properly structured sale leaseback, which often is greater than the book value of the asset being sold.
Simultaneous with the sale, the parties execute a lease whereby the user leases the property back from the investor.
If structured properly, these sale-leaseback transactions can provide excellent benefits to both the investor and the user.
Owners/users have used sale-leaseback transactions for decades to free up capital invested in real estate and convert it to alternative uses, primarily for their businesses. Property types that lend themselves to sale leasebacks are freestanding single-occupancy buildings (industrial warehouse/distribution, research and development facilities, corporate offices) and most types of retail.
Governmental entities also consider sale leasebacks for some of their facilities. Sale leasebacks can offer an alternative to conventional financing to raise capital. Conventional financing encumbers the real estate asset when listed as a primary liability on the balance sheet, whereas the lease from the sale leaseback, if structured as an operating lease, may be indicated as a footnote according to generally accepted accounting principles (GAAP).
Quite often, if the facility has been owned for a reasonably long period, the balance sheet can be improved. An asset at current book value is removed from the balance sheet and replaced by the cash that is raised from the properly structured sale leaseback, which often is greater than the book value of the asset being sold.
COMMERCIAL REAL ESTATE
TRANSPARENCY | CAPITAL PRESERVATION | INCOME STREAM | TAX SHELTER | HEDGE AGAINST INFLATION
VALUE APPRECIATION | PRIDE OF OWNERSHIP
TRANSPARENCY | CAPITAL PRESERVATION | INCOME STREAM | TAX SHELTER | HEDGE AGAINST INFLATION
VALUE APPRECIATION | PRIDE OF OWNERSHIP
