Are you considering selling your business?

Maybe this can help……..

What is a real estate Sale Leaseback?

A Sale Leaseback is an opportunity in its purest form, a financial tool to inject capital into a business with good credit.

This may be a helpful injection of capital in times of economic downturn to finance business essentials or expansions, through the sale and leaseback of owner occupied property.

What are the advantages of a real estate Sale Leaseback?

• Business owner retains control and utility of the property
  Removes a capital asset from the balance sheet and replaces it with capital from the sale
• User can depreciate the property involved as the lease payments cover the utility of the land and building, and are tax deductible
• Is an attractive exit strategy for an owner to sell real estate that might not otherwise readily sell
• The cost of capital may be at a lower rate than would otherwise be available through a conventional business line of credit

What are the disadvantages of a real estate Sale Leaseback?

• Tax implications, capital gains & depreciation, could be significant if the property has been owned for a long period of time
• Lease rate and terms are renegotiated at end of initial leaseback term.
• Owner may lose right to use property at the end of initial term due to Landlords plans for property in future.
• Loss of flexibility to make changes readily to structure and property without prior permission from Landlord
• User can no longer include the property in the sale of the business
• Most investors require a minimum of 10 year lease term in a Sale Leaseback situation

Who needs to be involved in a Sale Leaseback?

Because of the complex nature involved with a Sale Leaseback it is advisable to assemble a team in advance.

General accounting rules, assembly of a lease, and current market conditions require that all of the following practitioners be involved, an accountant, lawyer, and commercial real estate professional.

About the Author

Chad May is the Principal Broker at Investment Realty Advisors LLC. Mr. May concentrates on the representation of investors, tenants, and owners in commercial real estate transactions. With several years of experience in the commercial real estate industry, Investment Realty Advisors, is capable of meeting the challenges present in a changing real estate market