What is a Sale-Leaseback Agreement?
Posted on November 28, 2017
The low-interest rate environment combined with rising appreciation of real estate over the past few years have provided businesses across a wide range of industries with a unique opportunity to raise capital, pay down debt and lock in favorable lease terms via sale leasebacks.
In a typical sale-leaseback arrangement, a company will sell real estate it owns, such as a bank branch, gas station, retail store or restaurant, and simultaneously enter into a long-term agreement to lease the property back from the buyer at fixed rates. The original owner, now seller, will receive from the buyer cash proceeds that represent the full value of its property acquisition and development costs, allowing them to take advantage of the cash value of the property without recognizing the debt on its balance sheet. Additionally, the seller may receive the benefit of tax deductible rent payments and deferral of capital gains taxes if they use the sales proceeds to purchase like-kind 1031 property. In some instances, sellers may negotiate an option to repurchase the property at a later date, providing them with a potential bargain should property values depreciate in the future.
Sale leaseback are not quick real estate transactions. Because buyers and sellers enter into long-term relationships with one another, both should employ substantial vetting, as compared to a traditional transaction. Real estate brokers and other experienced advisors are valuable resources for guiding sellers through this process.
The professionals with Orion Real Estate Group have facilitated many successful sale-leaseback transactions by developing financial lease sale and leaseback terms that are beneficial to both investors and tenants.
The team at Orion work with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.
