In today's business climate, corporate financial objectives, including the use and allocation of capital, are under constant scrutiny. Corporate-owned real estate can be costly and erode profits. However, real estate can be used to unlock shareholder equity.
Sale-leaseback transactions are an alternative method for raising capital. A sale-leaseback transaction allows a property to be sold and immediately leased back to the seller. After the transaction the seller is able to make use of the property in a more productive way. Tenants profit from the sale, while retaining full operating control of the property.
A form of off-balance-sheet financing, the major benefit of sale-leaseback financing is unlocking the capital bound by real estate ownership. It can be a lucrative option for companies:
- Looking to finance growth
- Making an acquisition
- Paying down a debt
- Reallocating capital into more productive uses
Our Advantages
Sale-leaseback financing is more than just a cost-effective alternative to investing in commercial real estate. It's a capital management tool that allows corporations to use and control essential real estate without employing vast sums of debt and equity capital in an illiquid, poorly perceived asset class. Properly executed, a sale-leaseback transaction can:
- Unlock corporate capital trapped in under-performing real estate
- Provide longer-term capital (15-25 years) than is available from traditional debt sources
- Come at a cost comparable to debt financing and substantially less than the weighted average cost of capital
- Result in off-balance sheet treatment for generally accepted accounting principles (GAAP) purposes
