As we all navigate during this difficult time, I am continually trying to find the best ways to assist my clients. I would like to share some of the most effective ways I have been able to assist past clients to be better prepared for the unknown. This week I will be featuring “Sale-Leasebacks”.
One of the ways companies raise funds, increase earnings and enhance liquidity is by freeing capital tied up in their real estate holdings.
What is a sale-leaseback?
In a sale-leaseback, a company sells the real estate it owns (or could have debt in place) outright then leases all or a portion of it back from the investor, thereby freeing most or all of the capital.
What are some benefits of a sale-leaseback?
These lease payments may be structured in more flexible ways taking into consideration our current environment. In addition, sale-leaseback structure does not impose any operating covenants, as does traditional financing, so companies can gain more operating flexibility.
Why should companies consider it now?
With the unprecedented financial upheaval caused by COVID-19, the sale-leaseback usually brings 100 percent of the asset’s capital back to the company, where traditional financing offers a percentage of the asset’s value. Sale-leasebacks also provide an agreed upon annual rent structure for the asset. These lease payments may be structured in more flexible ways.
Next steps:
At the moment I still have very active buyers. Should this be an avenue you would like to explore I can provide you with an investment pro forma for your review.
With many video meeting capabilities, I have found ways to continue to be a resource to effectively assist you during this time.
We will all get through this together. Please don’t hesitate to reach out if you need anything.
