What you need to know about Sale-Leasebacks in Commercial Real Estate
Sale-Leasebacks are becoming more and more common in todays market and we have been receiving some inquires about the process. So we thought it would be helpful to provide an overview of the process to better explain the concept. This explanation will give perspective on why you might want to consider this option.
A “sale-leaseback” is a real estate transaction whereby the current owner of a property enters into a simultaneous agreements to (1) sell the property to a buyer and (2) lease the property from the buyer for a predetermined period. In this process there are only two parties, however those two parties will play four different roles; stick with me. The Seller becomes the Tenant and the Buyer becomes the Landlord, see it wasn’t that difficult.
In this process like any other there are pros and cons and depending if you are looking at this from the Buyer /Landlord or the Seller /Tenant perspective. Lets take a look at each:
Buyer / Landlord. One key opportunity of entering into a sale-leaseback from the Buyer / Landlord perspective is the opportunity limit your exposure as you invest into a relatively low risk scenario given the lineage of the existing business. Properly structuring the lease to the correct economics affords the Buyer / Landlord the ability to earn a predetermined ROI for the life of the lease. There are several different primary structures of a lease, we would be happy to walk you though what is appropriate for your personalized scenario.
Seller / Tenant. One of the primary reasons a Seller / Tenant would consider this type of arrangement is the ability to remove debt encumbering the property from its books; however this also liquidates the equity simultaneously. The sale-leaseback process give the Seller / Tenant control and allows them to choose when to receive the financial benefits (less out of pocket operating cost) while continuing to operate at the same address they have had for years.
If you are seeking assistance on how to structure this type of arrangement please let us know and we will customize an approach to meet your needs. Points to consider are the length of the lease, monthly economics, and other conditions that are required for your future successes.
Sale-leaseback transactions offer several advantages to Buyers and Sellers alike depending on the terms of the deal. When you would like to discuss your options of a potential sale-leaseback transaction, please contact CrossPoint – Commercial Real Estate Services at (859) 484-7080.