| The strategic conversion of corporately owned real | | | | vehicle. Many corporations across the country have |
| estate into working capital has proven extremely | | | | employed sale-leaseback financing as a viable source |
| beneficial to corporations, particularly as their | | | | to help finance mergers and acquisitions or leveraged |
| executives are scrambling to find funds to help grow | | | | buyouts. Many companies often use sale-leaseback |
| their companies. The benefits of sale-leaseback | | | | financing as a way to eliminate long term debt |
| financing has become all the more obvious with the | | | | obligations from their balance sheets and enhance |
| economic slowdown and the tightening of the credit | | | | liquidity. This effective financing vehicle also allows |
| markets. Companies have found that access to their | | | | companies to fuel their growth while focusing on their |
| traditional capital resources has become more | | | | core business operations. |
| restricted, which in turn, has impacted their ability to | | | | The duration of the lease is negotiable, for a period |
| access competitively priced debt. Under these | | | | of typically ten to twenty-five years. |
| circumstances, the advantages of sale-leaseback | | | | A triple net lease is typically used. This form of lease |
| financing has emerged as a unique opportunity to | | | | allows the tenant to remain in complete control of |
| raise capital without clouding one’s balance sheet | | | | the property under the lease provisions, while being |
| with long-term debt. | | | | responsible for property taxes, insurance and |
| Sale-leaseback financing can be defined as a | | | | maintenance and expenses derived from occupying |
| corporate entity selling their owner occupied asset to | | | | the property. |
| an investor, usually at a fair market value- Price is | | | | Sale-leaseback financing can be used for both existing |
| usually based on an appraised value. The financing can | | | | and build-to-suit real estate. Regardless of the type |
| be utilized for one asset or an entire portfolio. The | | | | of property you own, i.e. retail, office, industrial, |
| investor provides the seller with a triple-net operating | | | | educational buildings, health care, industrial facilities, |
| lease for a period of 10 to 25 years plus options so | | | | service centers, distribution warehouses or fast-food |
| that the seller can continue to occupy the property. | | | | establishments, you can fully benefit from clear |
| Initially, the seller/tenant usually pays the investor a | | | | advantages of sale-leaseback financing. Numerous |
| negotiated annual rent equal to 6.5% to 12% of the | | | | privately and publicly held companies have employ this |
| contracted sale price. Investment grade corporations | | | | financing method successfully everyday. |
| command a lower rate, while non-investment grade | | | | Sale-leaseback financing is an important capital |
| tenant command a higher rate. Because the rate is | | | | resource which is often overlooked. The attributes |
| credit-driven, the real estate is considered to be | | | | that this financing system provides, is all the more |
| additional collateral. | | | | welcomed as spreads on traditional mortgage debt |
| Small and large businesses alike can benefit from | | | | are widening. Given the instability of the securitized |
| sale-leaseback financing; however, in the beginning, it | | | | debt market, this financing vehicle makes a perfect |
| was mostly chain businesses and national franchises | | | | alternative to traditional and non-traditional mortgages. |
| that took advantage of the benefits of this financing | | | | |