Sale-Leaseback Transactions

Although the financial markets have been thawing over the past 18 months, banks are still somewhat risk averse in their lending activities. As a result, the last five years have been a very difficult time for small and mid-market businesses, in particular those without strong cash reserves. Now that the economy is on the mend, bank credit and other sources of capital are in greater supply as access to capital steadily improves.
For companies needing to raise capital, but which which find themselves locked out of the credit markets, there is another alternative. This alternate is only available for companies that they have an equity stake in their existing commercial property. The transaction I am speaking of is known as a sale-leaseback.
Explanation of a Sale-Leaseback?
A sale-leaseback in a real estate transaction which allows a company to reduce its financial stake in its land & building, thereby freeing the cash that’s tied up with these assets. In exchange for executing a lease and paying rent, the company agrees to sell its stake in the property.
Stated another way, A real estate sale-leaseback is a transaction in which the owner-occupant sells the land and building used in its business while simultaneously leasing the property back from the investor on lease terms agreed to concurrent with the real estate sale transaction.

Benefits:

Set Your Own Lease Terms
Because the proposed lessee is also the seller, it has significant leverage in how the deal is structured, especially in a market of rising costs for commercial properties.

Tax Savings

No Financial Covenants
Because a sale-leaseback is not technically a financing instrument, it will likely contain few if any covenants upon the company.

Attractive Implied Financing Rates


March 14, 2017 Facebook Twitter LinkedIn Google+ Uncategorized


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