The COVID-19 pandemic has created sudden change in the economy and is certainly having an impact on commercial real estate buying, selling, and financing. The lending environment itself has tightened up considerably, making it much more difficult to obtain and secure financing. Banks are overloaded with the PPE program and timelines are extending, making it difficult to stay agile and move quickly when an investment opportunity does become available in the market.
As a result, many operators are looking into their existing portfolios and trying to identify opportunities to leverage equity and raise cash to move on new opportunities, make property improvements, or strengthen their cash position for operations. At Sands Investment Group (SIG), one of the strategies we are using to create capital and leverage opportunities in the current economic state is sale leasebacks.
A sale leaseback is a financial strategy in which a property owner sells their commercial property and retains a long-term lease with anywhere between 40-50 years of control. This option can create capital necessary to move on other new business opportunities, reduce bad debt and costs, and potentially reduce the overall occupancy cost for the business.
Here are three ways Sands Investment Group is using sale leasebacks to help operators weather the current financial situation brought about by the COVID-19 pandemic and come out the other side stronger than ever.
1. Get rid of bad debt and trade it for reasonable landlords.
In the current economy, banks have become more rigid in their lending and financing practices, which is causing undue pressure on investors who need the flexibility to move quickly when a commercial real estate investment opportunity becomes available in the market.
A sale leaseback provides you with the opportunity to reduce debt loads by selling a property while staying on as a tenant with a fixed lease payment. This allows you to retain your initial capital investment in the property. This option can also provide more operating capital for your business and provide a more favorable, humanized landlord-tenant relationship.
2. Identify ways to reduce occupancy costs.
At SIG, we are finding that principal and interest payments on highly leveraged assets are commonly held for a higher monthly payment than a rolled or fixed cost at today’s CAP rates. Additionally, in a sale leaseback—as an operator—you will be able to both recoup your initial down payment and pay off all debts.
In uncertain times like these (where every penny counts), SIG is looking for ways to forecast post-COVID sales for businesses. We’re also looking for every possible way to reduce overall occupancy cost of real estate and stack up the war chest so we not only have a runway to operate the business, but make sure funds are available for post-COVID opportunities.
3. Raise capital for future buying opportunities.
Most of the deals on the table today are prompted by quick fixes and the ability to come to the table with cash, and for most of us, that cash is sitting in our existing real estate investments. A sale leaseback strategy provides necessary capital for future investments or buying opportunities.
The common sentiment in the market is that this disruption is going to turn into opportunities. In this way, COVID-19 has accelerated selling or retiring from the business, creating opportunities for investors who are looking to expand.
Overall, SIG is providing a capital solution to fund portfolio acquisitions and growth opportunities as they arise.
About Sands Investment Group
Sands Investment Group has extensive experience in all types of commercial real estate and is an industry leader in the net lease investment space. We can help you navigate and advise you on how to leverage your existing assets in the current economic climate and create capital to fund your future investments.
With over 2,200 transactions in 48 states worth $4.7 billion since 2010, Sands Investment Group is the fastest growing net lease investment company in America. We provide highly personalized client services, employ innovative marketing techniques, and have access to an extensive network of investors to help you find the perfect investment or sell a property you own for the best profit.
Want to learn more sale leasebacks and other investment opportunities that don’t require you take on any more debt? Get in touch with an expert today by calling 844.4.SIG.NNN or sending us an email at info@SIGnnn.com.