Creating Liquidity: The Benefits of a Sale-Leaseback

March 4, 2016 Designer No comments exist

Creating Liquidity: The Benefits of a Sale-Leaseback

Sale-Leaseback
Sale-Leaseback

Quite popular as investment vehicle during the early-2000 commercial real estate boom, the sale-leaseback transaction is once again making a comeback across domestic markets, including Albuquerque. There are many reasons why business owners choose to participate in a sale-leaseback; a need to create cash flow, wanting to create an opportunity for the asset, or a need for an exit strategy.  Whatever the reason, there are many benefits to performing a sale-leaseback transaction for your commercial real estate asset.

How Does a Sale-Leaseback Work?

A sale-leaseback is a transaction where the owner/occupant of a commercial real estate asset, typically a single-tenant property, sells their asset and simultaneously leases it back from the buyer. A typical lease is long-term, usually 10 years plus, and on a triple-net basis. A sale-leaseback works for all property types, medical, office, retail or industrial.

Benefits of a Sale-Leaseback

Cash Liquidity

A sale-leaseback is a fast and easy way to create cash for your business. By transitioning from owner to tenant, a sale-leaseback reduces a business owners’ investment in non-core business expenses creating cash liquidity to focus in other areas like inventory, equipment or upgrades. Since in a sale-leaseback the seller becomes the tenant, businesses owners see additional savings by writing off the cost of the lease as an expense.

Attractive to Market

If you are looking to sell your commercial real estate, what’s more attractive to the market than an asset 100% occupied by a solid company? Investors see the sale-leaseback as a opportunity for strong, consistent returns. Companies with a healthy balance sheet and long proven operating histories are good candidates to benefit from this type of transaction.

Exit Strategy

A sale-leaseback provides an exit strategy for the owner of the company to be able to sell the business and not have to deal with the real estate. In the Albuquerque market we are  seeing it in medical office space.  Say a doctor has owned his building and run his business in it for a long time and says, “Hey, I’m going to retire one of these days.” Instead of trying to sell the building when he retires he creates an exit strategy with a sale-leaseback and sells the building when he has 10 years left in his practice or longer.

Get the Help of an Expert

Although highly beneficial, a sale-leaseback should always be executed through a commerical real estate professional. Helping clients work through all transaction details and decisions like property value, lease type, terms, etc., a CRE broker ensures the best possible returns for their clients. If you’re looking for advice with your current, or future, commercial real estate give me a call at 505.256.7573 office, 505.269.9358 mobile or email me at  walt.arnold@svn.com.


 

About Walt Arnold, SIOR, CCIM: Bringing over 25 years of commercial real estate experience, Walt serves as Managing Director of SVN | Walt Arnold Commercial Brokerage, Inc. in Albuquerque, New Mexico where he specializes in the sales/leasing of office and industrial properties. Walt credits his determination and work ethic to his eight years in the National Football League playing for the Los Angeles Rams, Houston Oilers, and the Kansas City Chiefs. Active in the local CRE community, he is a Certified Commercial Investment Member (CCIM) and past president of CCIM–New Mexico, a member of the Society of Industrial and Office REALTORS, and a member and past president of the Commercial Association of Realtors of New Mexico (CARNM). Walt can be reached on Twitter @WaltArnold or at walt.arnold@svn.com.

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