Real Estate Sale Lease Back:
Key Elements and Assumptions in Analyzing a Sale Leaseback- What is the anticipated use of the proceeds from the sale, and in turn what will the projected return on that money be irrespective of the source of that money? - You can view a LseMod sample report or download a full report.
- The user/seller needs to consider the following alternative actions: - Status Quo - staying in an owned property as the owner,
- Financing / Refinancing the property, or
- Sale Leaseback - selling the property to a third party and leasing it back from them over a period of time.
- The following issues need to be considered in a financial analysis: - How to create an "apples-to-apples" comparison.
- What kinds of costs to be compared (e.g., the Profit & Loss (P&L) / Income Statement cost, EBITDA, and the Before and After Tax Cash Flow).
- What numbers need to be compared (e.g. frequently the Total" in the Status Quo is higher than the "Total" in a Sale Leaseback, but the right decision is the Sale Leaseback).
- Sale Leaseback accounting under GAAP (Generally Accepted Accounting Principals).
- Since the IRS (Internal Revenue Service) has special rules about how the gain/loss on the sale is treated if there is a Sale Leaseback. Note: The rules differ slightly depending on the type of entity selling the property (e.g., a C corporation vs. an LLC).
- How to factor in "opportunity cost/income" (the income that can be generated from the cash received from the sale).
- How to value the property in the Status Quo alternative at the end of the analysis period when it is sold (a building without a tenant is worth less than a building with a tenant).
- What is the term to be considered?
- Is there a viable alternate location today and if so, what is the value of the building today on the open market if vacant?
- What does the financial comparison of stay vs. relocate into an owned or leased location now indicate?
- How much can be borrowed against the property today and at what interest rate for a term similar to a possible leaseback?
- What is the tax status of the owner? Would there be special tax consideration and tax shelter options?
- Will the lease be NNN or a hybrid?
- Will the landlord reimburse undepreciated capital invested for building and structural upgrades in later years?
- You can view a sample report or download a full report.
Other Topics About Real Estate Sale LeasebackWhat Is a Sale Leaseback? Advantages of a Sale Leaseback to the Seller / User Disadvantages of a Sale Leaseback to the Seller / User Strategic and Operating Considerations for the Seller / User Advantages of a Sale Leaseback to the Investor Disadvantages of a Sale Leaseback for the Investor Key Elements and Assumptions in Analyzing a Sale Leaseback Creating a Sale Leaseback Financial Analysis Sale Leaseback Accounting Bottom Line Caution
© 2007 James R. Duport, All rights
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visit our web site at http://www.LseMod.com for information on our site selection financial
analysis software for commercial real estate. LseMod, the professional’s choice since 1996, is lease
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