Real Estate Sale Lease Back: What is It?What Is a Real Estate Sale Leaseback?- In its purest form a Sale Leaseback is a financing tool. It is a way for a company with reasonably strong credit to free up capital invested (tied-up) in an owned operating property while continuing to be able to occupy and use the property. It is an alternative to mortgaging or selling a property allowing a company to get access to tied-up capital for alternative uses, usually to place elsewhere in their businesses. - You can view a LseMod sample report or download a full report.
- This method of acquiring capital is often an attractive alternative to conventional financing which encumbers the real estate when listed on the balance sheet as a primary liability, whereas an operating lease can be indicated as a footnote. In many cases the cash raised from the Sale Leaseback transaction exceeds the book value of the asset being sold! - Typically, Sale Leasebacks are triple net leases with repair and replacement obligations for 10 years or more. Normally there are restrictions on the type of renovations that a tenant can undertake during the lease term. Depending on the type of asset, length of lease term, buyer's perspective and other factors, these obligations can range from mundane to onerous. - You can view a sample report or download a full report.
- There are numerous accounting and federal tax issues that must be considered in structuring a Sale Leaseback to assure for financial reporting purposes the leaseback will be an OPERATING (i.e. off balance sheet) lease as opposed to a CAPITAL lease. Generally, Sale Leasebacks are structured as operating leases and shown on the balance sheet only as a footnote. This paper will focus on operating leases. 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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