Sale - Leaseback: The Basics

A sale/leaseback is a financing technique that provides an opportunity to raise cash for your business. A sale/leaseback takes place when a business sells real estate it already owns to a third party for its fair market value ('the sale') and then immediately enters into a long-term net lease and continues to occupy the property (the 'leaseback'). Alternatively, the business identifies an existing building that it desires to use. It then allows a third party to purchase that property and immediately enters into a long-term lease to occupy the property.

Why should you consider a sale - leaseback with Rainwater Capital?

If real estate is not strategically important to your operations, why own it? By completing a sale/leaseback with Rainwater Capital, you can unlock the value in your real estate, increasing your cash on hand that can be used to grow your primary business. You will be paid full market value for your property which will provide cash to expand operations or pay down existing debt. There is no fee to your company.

The Benefits

A sale/leaseback is a financing technique that provides an opportunity to raise cash for your business. A sale/leaseback takes place when a business sells real estate it already owns to a third party for its fair market value ('the sale') and then immediately enters into a long-term net lease and continues to occupy the property (the 'leaseback'). Alternatively, the business identifies an existing building that it desires to use. It then allows a third party to purchase that property and immediately enters into a long-term lease to occupy the property.

If real estate is not strategically important to your operations, why own it? By completing a sale/leaseback with Rainwater Capital, you can unlock the value in your real estate, increasing your cash on hand that can be used to grow your primary business. You will be paid full market value for your property which will provide cash to expand operations or pay down existing debt. There is no fee to your company.

Financial and Tax Advantages

A sale/leaseback essentially provides 100% financing to the business owner. A seller/lessee (tenant) looking to build does not have to tie up cash in the form of a down payment required by conventional banks. A seller/lessee who already owns the property can unlock the equity in the real estate and turn that equity into cash.

If properly structured as an “operating lease,” the lease does not add short- or long-term debt or the real estate asset to the balance sheet. Thus, certain financial ratios, such as the debt-to-equity-ratio, the current-ratio and the return-on-assets-ratio are actually improved. Because Generally Accepted Accounting Principles (GAAP) omits this transaction from the balance sheet, the borrowing capacity of the seller/lessee may be increased.

By deducting lease payments, the lessee can write off the full cost of the real estate, including the portion that relates to land.

The tax deduction may be accelerated because it is spread over the term of the lease rather than 39 years, the term typically used for depreciating commercial buildings.

Criteria

• • Tenant : We have successfully completed transactions with public, private or family owned companies. In some cases, we can help family members retain a substantial equity share in the real estate, thus achieving estate planning goals as well.
• • Properties : Primarily single tenant commercial properties including corporate headquarters, office buildings, retail facilities, warehouses, distribution centers, light manufacturing facilities, health care facilities, bank branches and other special purpose real estate. Typical transaction size is $1MM - $10MM, but we are capable of closing on larger properties as well.
• • Lease : Typically triple net lease. Length of lease ranges between 10 - 25 years. Options to extend can be included.
• • Location : United States/Canada.