What exactly is a Sale-Leaseback?
Sale-leasebacks occur when a company sells its corporately owned real estate and simultaneously leases it back under a long term lease with the buyer of the real estate.
Why do them?
Sale - Leasebacks allow corporations to raise capital without taking on new debt. By selling off the real estate portion of its business, a corporation can use the proceeds to expand or modernize its operations, pay off debt, buy out partners, clean up balance sheets, even acquire other companies.
Isn’t it important for a company to own its real estate?
Not necessarily. A company must value its real estate in its overall investment strategy. Hopefully, the company is making more money by producing its product than it is from the residual value of its real estate. Besides, renting allows a company to deduct the full rental payment. When they own and have a mortgage, they can only deduct the interest portion, which is often less than the full rental payment.
How does it work in a nutshell?
The company continues to operate its business as usual out of the same location. That does not change. But instead of owning the building and the land, the company now sells those assets to an investor who agrees to pay the company a significant price in exchange for the company signing a long term lease, usually 10-20 years in length.
How do I find out if this is right for me?
Call us and we will go over the pros and cons to determine if this makes good business sense.
Can I see an example?
Assignment: Restaurant owner/operator wanted to raise cash without getting a loan and taking on more debt.
Plan: Owner worked with SLNCapitalMarkets to structure a sale-leaseback by creating a new lease with a rent structure that mirrored his mortgage payment.
Lease: Owner agreed to signa 13-year NNN lease with 1.5% annual rent bumps, making the long term commitment and terms attractive to a potential investor
Execution: SLN Capital Markets generated multiple offers and settled on a buyer who paid client more than $1.46 million, which was more than $1 million above the county’s market value for the property.