In a sale-leaseback transaction, an investor purchases a property currently owned and occupied by a user. Simultaneous with the sale, the parties execute a lease whereby the user leases the property back from the investor. The sale-leaseback transaction can provide excellent benefits to the investor and the user.
What are the benefits of this type of transaction? The sale-leaseback allows firms to access the capital tied up in owned real estate while avoiding additional debt by generating capital internally. Additionally, it converts a non-liquid real estate asset to cash while retaining control and utilization of the property. Users are able to free up capital invested in real estate and convert it to alternative uses, primarily in their businesses. Another benefit is the transaction removes a capital asset at book value from the balance sheet and replaces it with cash received from the sale. In general, the lease payments are tax deductible. Finally, it offers an ownership exit strategy for a user who might not otherwise be able to sell the real estate readily.
"There is currently demand for sale-lease back transactions within Clermont County. I encourage companies to investigate the merits of these types of transactions," says Rod MacEachen, First Vice President of CB Richard Ellis. When using an experienced Commercial Real Estate Broker, the typical transaction requires three to five months. Once an asking price and the financial terms of the leaseback are determined, an Offering of Memorandum and marketing campaign are prepared to expose the property nationally and solicit offers. Finally, the broker will coordinate the transaction by soliciting offers from qualified buyers and selecting the highest and best offer to negotiate a sales contract and work through due diligence to the closing.
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