The Basics of a Sale Leaseback

Are you looking for a way to achieve significantly higher real estate values? A sale-leaseback is a financing tool that allows property owners to sell their real estate assets to another buyer as they sign a long-term lease to be the tenant, securing the location in the process. Simply put, the seller of the asset becomes the lessee as the purchaser becomes the lessor.

In the current state of the market, the sale-leaseback is becoming more prevalent across industries. With the numerous benefits that come with it, this is no surprise. Sands Investment Group is here to provide you with the basics of a sale-leaseback, so you can decide whether it is the right fit for your commercial real estate investment decisions.      

Who should consider using a sale-leaseback? 

Often, the most common participants are builders or companies with high-cost fixed assets, in this case, commercial real estate. It allows these people to use the cash they invested in commercial real estate in other ways while still needing the asset to operate the business. 

Does this sound like a financing tool that could benefit you and your business as an investor? Sands Investment Group could be the resource you have been looking for to start.  

What is the process of a sale-leaseback? 

Understanding what a sale-leaseback looks like is one thing, but going through the process is another. At Sands Investment Group, we break down this process into three steps. 

1. Evaluate the Business 
2. Market Analysis 
3. Structuring a Lease

As the overarching tasks, each of these steps breaks down into extensive research tied to the characteristics of your specific case. Find the details here. 

What are the benefits of a sale-leaseback? 

The benefits of a sale-leaseback are broken down into that of the original seller and the purchaser. It creates a mutually beneficial agreement that creates opportunities for both parties to see positive impacts in their financial pursuits.  

For the original seller, one of the first benefits to consider with a sale-leaseback is that it is an alternative method of raising capital. In the instance of a loan, the company must repay the money, making it appear on their balance sheet as debt. With a sale-leaseback, the liability on the balance sheet decreases, while the current assets will increase. It does not present the same appearance of debt in the long-term overview of the business.   

Along with the benefits present on the balance sheet, sale-leasebacks give you the chance to grow your business with ease. This means you can use the capital to open other locations, expand the current company, or acquire another business or real estate property. As you grow, the volatility risks of owning the asset decrease with this method.  

On the other hand, the purchaser can expect benefits as well. From the start, they achieve ownership of a cash-flowing asset that also happens to be backed by a long-term lease. They also know that the long-term lease is tied to someone who wants to be a tenant and continue to utilize the property because of how a sale-leaseback originates. As a result, the purchaser can deduct the property’s depreciation expenses from their income taxes. 

Find the perfect sale leaseback listing for you by looking at the active inventory Sands Investment Group has to offer. 

Work With Sands Investment Group 

The sale-leaseback may be the financing tool you’ve been waiting for to expand your business. Now that you know the basics, it is time to take the next step. Sands Investment Group has experience in all types of commercial real estate to help you navigate leveraging your existing assets for more capital to fund future investments. 

At Sands Investment Group you can find highly personalized client services with an extensive network of investors to help you get started on discovering more about sale leasebacks. Call 844.4.SIG.NNN or find out more on our website.      

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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.