06/02/2018
SALE-LEASEBACKS
A Smart Real Estate Strategy in Tough Times
Manufacturers today have been brought to their knees due to poor or non-availability of financing, but what about a solution that will unlock capital without disrupting on-going operations? Is it possible to monetize assets, strategically and aggressively pay-down debt, or find an alternative source for capital without involving a lender or drastically altering business operations? Quite simply, yes.
Corporate Real Estate consultants specialize in analyzing, planning and executing individualized strategies to best optimize financial resources by unlocking capital from real estate holdings. For example, consider the sale/leaseback arrangement. A sale/leaseback is best described as a financial transaction where a fixed asset (real estate) is sold and then leased back to the former owner by the new owner (investor). A sale/leaseback enables a firm to withdraw its equity in an asset without relinquishing use of the asset.
As an example; a manufacturer in this struggling economy needs to raise capital but is unsure of the viability of taking out a loan and does not have immediate access to liquid funds. One possible solution would be to consider a sale/leaseback transaction. Through this transaction the seller attains a lump sum of cash quickly while the business continues in the existing facility through a long term lease with the new buyer.
A sale/lease back transaction can offer a viable solution for a number of situations. However, like all real estate transactions there are a number of basic requirements and it is prudent to seek the advice of financial experts as well as a qualified real estate professional/consultant to assist in analyzing the real estate assets and goals to create a solution that best suits the business’ needs.
Benefits of the Sale-Leasebacks
♣ Allows seller to make full use of the asset while not having capital tied up in the asset.
♣ Possible tax benefits and rent payments are often a legitimate business expense on annual tax returns.
♣ Diversifies the funding sources of capital for a company outside the typical debt and equity markets.
♣ Provides immediate access to capital.
♣ Helps to pay down debt and improve the company’s balance sheet.