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Kate Morrisroe

+1 847 384 2821

Kate.morrisroe@colliers.com

©2018 by Net Lease Investment Team

SALE-LEASEBACK

What is a Sale Leaseback?

A Sale-and-Leaseback (sale/leaseback or SLB) is a transaction where the business owner sells their real estate  then leases it back from the purchaser. This can be a powerful tool for unlocking capital that can be utilized in: Investment and Diversification.

Key Advantages of a Sale Leaseback Transaction

For many companies, whether private or public, real estate is not considered part of their core business, yet it remains one of their largest expenses.  Motivation factors for sale leasebacks might differ from company to company, but unlocking the value in real estate can offer significant benefits when handled properly. Reasons may include:

ADDITIONAL BENEFITS INCLUDE:

1.    Gaining flexibility/transfer of risk - Since you will have already cashed out the maximum value of your real estate at the height of the market, if down the road you decide to relocate, upsize, downsize, or close operations, you will have gained the flexibility to do so without having the burden associated with ownership of an outdated and vacant building that is now worth a fraction of its former value.  Additionally, the risk of having to pay  the taxes, insurance, and common area maintenance, along with re-tenanting what are often difficult single-use buildings is now someone else’s problem.


2.    You don’t have to give up the depreciation tax benefits associated with owning your building – there are options available where you will still own the building and are only ground leasing the underlying property.

WHY SHOULD I CONSIDER A SALE/LEASEBACK NOW?

The amount of proceeds that you will receive from a sale/leaseback is directly correlated to Capitalization Rates (cap rates). Low cap rates mean higher real estate valuations.  Cap rates were previously the lowest they had ever been in 2007 – until now.  The current bubble that we are experiencing – fueled by unprecedented demand as well as low interest rates – has pushed cap rates to record lows, affording property owners the opportunity to sell into a highly competitive buyer pool and realize exceptional value for their real estate.

FREQUENTLY ASKED QUESTIONS:

Q. How much control am I giving up over my property?

A. You will still control the real estate though a long-term lease.  Through this, you will be able to tie the property up for decades through renewal options.

Q. What is the dollar value that I can expect to receive through a sale/leaseback?

A. Every case is different, through a quick conversation with our team, we can help to give you a range of likely value.  One important thing to understand is that the value of the building and land is often worth far less than the leasehold interest –the purchaser is essentially buying you as a tenant and because of this, the proceeds can be much greater than the value of the building and land.

Q. My business has been struggling – can I use this product to help recapitalize my operations?
A. Yes.  Our team has undertaken turn-around sale/leasebacks and can structure a deal that addresses your specific needs

The Net Lease Investment Team is highly-experienced in these types of transactions and can help you to assess the benefits, likely proceeds, and then determine whether this is right for your unique situation.