What is a Sale Leaseback?

What is a Sale-Leaseback Transaction?

What’s all the fuss over sale-leasebacks?  Unless you’re an investor or occupant neck-deep in the multitude of benefits that accrue to sale-leasebacks, you’re very likely to pass them off as simply “another investment option,” meant for others with different transactional strategies. 

But take a closer look. What is a sale-leaseback?  Sale-leasebacks (SLBs) are a classic good-for-goose-and-gander vehicle that, for investor and owner-turned-occupant alike, represents a classic win/win. 

Indeed, everyone, on both sides of the negotiation table, gain through a well-structured SLB. Let’s take a look first at the owner of the property, or more properly, the former owner, turned tenant. 

By selling the asset or assets in an owner/occupier’s portfolio, they accomplish two key goals: First is to establish a market-leading, long-term lease that provides the security of location and a solid partnership with the new asset owner. 

Second is to unleash the power of that heretofore locked-up value–the full, fair-market value of that real estate–which can be put to more productive strategies. These are limited only by the imagination of the decision-makers, but can include:

  • Perform much-needed upgrades to internal operations to enhance productivity or to upgrade the interiors to enhance employee recruitment and retention.
  • Expand territories through acquisitions for competitive positioning.
  • Employ that freed-up capital to repurchase stock.
  • Diversify your investments–especially in this age of socially responsible investing–and give back to the local community.

The new owner of the building or buildings gain as well. Primarily, they gain by the presence of an already established creditworthy tenant for the extended period of that lease agreement. And by extended period, we’re referring to lease durations of up to 20 years with multiple extension opportunities and rent bumps built in.

Arguably the biggest benefit of sale-leasebacks to the newly minted owner is the net-lease nature of the tenant agreement. The triple-net lease is the most common form of this structure and places the burden of ownership costs at the doorstep of the tenant. These include operating expenses, real estate taxes and structural upkeep. 

We hear so much these days about maximizing opportunities. Sales-leasebacks with a net lease agreement built in are a real and present opportunity for seller and buyer to maximize not only the value of their holdings but, equally, to maximize a mutually beneficial, long-term partnership. 

If you’re considering a sale-leaseback, let us help you implement the best strategies and market your asset for a maximized sale.  We will not only help you craft the best lease that allows you to maintain control, but that sets the property up for a maximized profit.  And then our experts can take the property to market and execute a seamless transaction on your behalf.

Give Calkain a call today to discuss your sale-leaseback.

Traci BidingerWhat is a Sale Leaseback?