Sale Leaseback
For companies that own the property on which they do business there may be no better way for them to generate an infusion of cash than a Sale Leaseback Transaction. The Sale Leaseback Transaction is one where a company sells the property it currently owns and then occupies it as a tenant. This type of transaction is valuable to an investor because they in turn get a property with a stable tenant.
Sale Leaseback Candidates
- Redistribution of Capital - Companies may earn a higher return on capital placed in their primary business instead of invested in the real estate they occupy.
- Exit Strategy - Corporations up for sale are candidates for the Sale Leaseback. Selling the real estate prior to selling the business can maximize the sale proceeds from both.
- Capitalize on Increased Real Estate Values - Businesses with a number of locations could bundle several of their properties in a larger portfolio and sell to an institutional investor at a price that is greater than their cost.
- Cash Infusion - Companies that own and occupy real estate can sell and lease back to free up capital for expansion or operations.
Sale Leaseback Benefits
- Your business may be in a prime position to benefit from a Sale Leaseback. Some of the advantages of the Sale Leaseback for your business will be:
- Converts a non-liquid real estate asset to cash while retaining control and utilization of the property.
- Cash infusion to invest back into your company, to reduce debt load, or to provide better return on alternative investment strategies.
- Allows you to remove a low value capital asset at book value from the balance sheet and replaces it with cash received from the sale.
- Capitalize on the recent increased market value of real estate.
- As a tenant, you’re allowed to deduct the full amount of your lease payment for tax purposes.
- Offers an ownership exit strategy for a business that might not be able to sell the real estate readily.