The Sale-Leaseback Process: Unlocking the Value of Your Real Estate

To Sell or Not to Sell?

The sale-leaseback option is an attractive financing alternative for companies who want to remove debt from their balance sheets. The term “sale-leaseback” derives from the process itself. If you’re a business that owns your space, you can sell your property and lease it back from the new owner. This transaction allows you, the seller, to capture built-up equity and remain in the space as an occupier. In turn, this equity allows your business to access cash you may then use to finance new equipment or technology, acquire a competitor or bolster inventory. No matter the size of your organization, this may be the best time in years for such a transaction—especially since real estate values are peaking and there are more investors in the market looking to buy.

The main objective of the sale-leaseback transaction is to determine the proper balance between the anticipated sales price and the structure of the lease (i.e. initial lease rate, rent increases, lease term, expense structure) that will satisfy the investor’s yield requirement and meet your stated objectives. 

At Cresa, our real estate advisors will work closely with you to clearly understand your short- and long-term objectives. With this knowledge, we prepare various options that are customized to fit your needs and determine if a sale-leaseback is the best option for you.

Questions to Consider

Before selecting the sale-leaseback option, ask yourself these questions:

  • What is the rate of return on your company’s core business?

  • What is the rate of return you earn on your company’s real estate holding?

  • Would it make more sense to hire more employees, open additional offices, or start up a new division to generate a higher rate of return?

  • How will a sale-leaseback impact our financial ratios/earnings?

  • How does the implied cost of a sale-leaseback compare to alternate forms of financing?

  • What risk premium will the market associate with our company’s credit rating?

We already have a proven track record in assisting our clients with the sale-leaseback process; we can help make the answers to the questions above a solution for your business.

Contact Jeff Hartsook for a consultation today.