Real Estate Sale Leaseback
According to Wikipedia a sale leaseback works as follows: After purchasing an asset (like an office condo), the owner enters a long-term agreement by which the property is leased back to the seller, at an agreed-to rate. One reason for a leaseback is to transfer ownership to a holding company while keeping proper track of the ongoing worth and profitability of the asset. Another is for the seller to raise money by offloading a valuable asset to a buyer that is presumably interested in making a long-term secured investment.
Leaseback arrangements are popular in the United States and the United Kingdom. The seller is often a property management company, Typically the initial lease is for 9 to 11 years. The net rental yields are usually in the range 4 to 6% per annum (based on the purchase price). The properties in these arrangements may be residential units, apartment buildings, factories, resorts, or almost any other type of commercial real estate.
Leaseback property has been popular in France for many years and there are significant tax advantages. The French government encourages the development of leaseback schemes in tourist areas to alleviate shortages in rental accommodation. The French government will rebate the local tax, called TVA, when the property is purchased. Currently the TVA rate is 19.6%. In France, a leaseback property typically has to remain in the leaseback scheme for a period of 9-20 years, depending on the specific property and program.
The leaseback concept has spread to other European countries including Spain and Switzerland. Typical property available are studios, apartments and villas. They are situated in ski areas, beach resorts or golf courses.
Sale-leasebacks have been more common with equipment, equipment sale leaseback, and have been very successful for the major capital financing companies like GE Capital. The same concept holds true in that you sell your equipment, get a cash infusion, and then lease the equipment back. This sale leaseback financing technique gives you access to cash and improves your balance sheet. This kind of financing is widely used in all sectors, including industry, transport, logistics, services and healthcare.
If you are a business you own your office condo or office building and are looking for a long term secure investment, a sale leaseback is an excellent option. Sale-leasebacks help property owners free up equity for other business needs. With a sale-leaseback, any business sells its commercial property and then immediately leases it back to free-up capital. The Arizona business (or any state) then receives the market value and enhances liquidity, while retaining long-term control of the real estate. Your business can make full use of your asset while not having capital tied up in the asset.
Many corporations all over the United States and Europe are increasingly focused on monetizing their real estate assets to reduce occupancy costs, create capital for other business needs (sales and marketing), create an exit strategy for specific assets, secure an alternative financing solution, or any combination of these business goals.
If you are interested in learing more about sale leaseback options to achieve and exceed your financial and operational objectives send an email to get introduced to the best long term and secure real estate investment available. You will be put in touch with the Arizona sale leaseback expert for the hottest market, Arizona, and ask for yourself what the best sale leasback options are on the market or call 480-276-3842.
Transaction Options for Sale Leaseback can include
· Single asset sale/leasebacks
· Portfolio sale/leasebacks
· Build-to-suit transactions
· Synthetic lease restructurings
· Excess property dispositions
On the accounting side of a sale-leasebacks, there are often tax benefits in addition to better utilizing your business assets. Sale-leaseback agreements vary based on what area of the US you are in as with the tax benefits.
Sale Leasebacks In The News
Bundling Sale-Leaseback Sales By Beth Mattson-Teig
Corporate portfolio sale-leasebacks have hit record levels in the past year with major deals from retailers such as CVS and ShopKo posting staggering numbers. In December, CVS Corp. announced that it had initiated a sale-leaseback of 340 owned or ground leased pharmacy properties in 29 states for $1.3 billion. ShopKo clinched a deal to sell and lease back 112 ShopKo properties and 66 Pamida properties for $815 million. Corporations are using the capital to finance everything from aggressive expansion campaigns to leveraged buyouts.
These two deals represent the extreme high end of the spectrum, but investors are showing appetites for multi-building portfolios that often feature single tenants with long-term, triple-net leases.
“A few years ago, a large dollar amount would have been a non-starter,” says Brian Scott, a senior managing director in the sale-leaseback group at CB Richard Ellis in New York. “But these days, the larger size is not much of an impediment because of all the capital looking for investments,” Scott says.
One would think that the higher prices would lessen the field of potential bidders. Yet it seems that the reverse is true. In fact, portfolio real estate is an increasingly crowded and competitive niche.
Portfolio sale-leasebacks involving a tenant with strong credit and quality real estate can receive upwards of 30 to 40 bids. Even portfolios of lesser-quality properties and non-investment grade tenants are receiving five to 10 offers.
Despite some of the high-profile sales, what is surprising is that a lot of these portfolio transactions are being done off the radar screen. “There are so many net lease funds out there that they are contacting companies directly, so sale listings are not even hitting the street,” says Jonathan Hipp, president and CEO of Calkain Cos. Inc., a brokerage firm in Reston, Va. For example, Hipp recently brokered the sale-leaseback of six Advance Auto Parts stores in the Northeast for $15 million. Despite the fact that it was an off-market deal in which the bids were unsolicited, the deal attracted seven bidders.
Another reason that investors are drawn to larger portfolios is the incentive to diversify the risk geographically. “The bulk of our transactions are portfolio acquisitions, meaning two or more properties,” says Ben Harris, managing director and head of domestic investing at W.P. Carey (NYSE: WPC), a New York-based investment firm.
The company expects to acquire about $1 billion in commercial real estate in 2007. For example, W.P. Carey recently purchased three cold storage facilities in Atlanta from Nordic Cold Storage LLC for an undisclosed price.
Both portfolio and single-building sale-leasebacks are popular among investors because the properties are known for generating steady returns with very little hands-on management responsibilities due to the long-term, triple-net lease structure. Oftentimes, pricing is based as much on the tenant's credit quality as the quality of the real estate.
Net leases are often described as buying bond income in the form of real estate. “It's definitely a predictable income stream that is bond-like in structure from a number of different perspectives,” Hipp says. Although returns vary widely, top deals typically trade about 200 basis points over the 10-year Treasury.
In Summary, sale leasebacks offer liquidities from the sale of investment goods, plants (vehicles and machines), equipment (IT infrastructure and other equipment) or real estate like offices and business premises. This article focuses primarily on the real estate aspects of a sale-leaseback but any business looking for secure investments in this volatile market can do well looking into their options. To learn more send an email with your contact information to get in touch with the best real estate companies in your area offering sale leasebacks.
To find the best sale leaseback solution that is a long term secure investment in Arizona, click here to send an email with an overview of your situation to get in touch with the top sale leaseback solutions company in Arizona, Logan Commercial. Sale leaseback solutions are not a fit for everyone so get in touch with the best to find out quickly if a sale leaseback is a good solutions for you. Call 480-276-3842 to get in touch with the best sale leaseback expert in the industry. If your are a real estate investor looking for a long term secure investment call or send an email and ask for Jon.
