If your business owns and occupies its commercial real estate, you already know how challenging it can be to find a space that suits your needs. Finding the perfect space—whether it’s office, industrial, or retail—is rarely ever easy, especially when markets are experiencing low vacancies, rising property prices, and increasing construction costs. A sale-leaseback is an attractive financial arrangement for many business owners who want to maximize the value of their commercial real estate, raise capital, and reduce (or altogether eliminate) debt. And while the sale-leaseback process might seem simple on the surface, it's actually quite complex.
Without an experienced, CCIM-designated broker on your side, the process and outcome can be challenging, and that can end up being quite costly for your company. In today's blog, we'll be breaking down everything you need to know about how to conduct a successful sale-leaseback transaction.
What is a sale-leaseback?
A sale-leaseback is a real estate arrangement in which the company that sells an asset (office building, warehouse, etc.) can lease back that same asset from the purchaser/investor for a set amount of time, usually at least 10 years. In this type of transaction, you, as the seller, continue to occupy the entire property and begin paying rent (instead of paying a mortgage) as well as operating expenses under the triple net lease structure.
This type of lease allows your company to maintain control over the building so you can continue to operate as usual, without any disruptions. When the lease expires, you’ll essentially have two options. You can either (1) renew the lease - often at the pre-negotiated terms, which allows you to stay longer in that space, or you can (2) walk away and leave a vacant building with the CRE purchaser/investor and not be concerned about trying to sell he asset in an uncertain future.
Who utilizes sale-leasebacks and why?
Most often, the users of sale-leasebacks are companies who have high-value fixed assets, such as commercial property, expensive equipment, or desire to expand the business in additional markets. Sale-leasebacks are also a fantastic option for an alternative method of raising capital.
If your business needs to increase its growth capital, you may have considered taking out a loan. This, as you know, creates debt. A sale-leaseback transaction, on the other hand, can actually help improve your company's balance sheet. You'll avoid more debt and your access to growth capital will increase.
To sell or not to sell?
Okay, now that you have a general idea of how a sale-leaseback works (and how it can benefit your business), you’ll need to ask yourself a hard question: “Is now the right time to sell my company’s property?” At Fountainhead Commercial, our team of experienced real estate sale-leaseback brokers will take the time to understand your short-term and long-term goals. We'll also determine the anticipated sales price and structure of the triple net lease to ensure we're always representing your best interests. With our support, you’ll have a clearer idea of whether it’s the right time to sell or not.
Learn more about the sale-leaseback process and if it's right for you
If you're interested in learning more about the sale-leaseback process, reach out to us today at Fountainhead Commercial. With more than 40 years of combined CRE experience, we've helped hundreds of clients successfully navigate complicated commercial real estate transactions.
What are you waiting for? Contact us today to learn more.
