OPTIMIZE CAPITAL STRUCTURE BY FINANCING REAL ESTATE OFF BALANCE SHEET
◼ A financial transaction where one sells an asset and leases it back for the long-term.
◼ The purpose of the transaction is to free up the original owner’s capital while allowing the owner to retain possession and use of the property.
◼ As a corporate treasury tool, a sale-leaseback takes the place of the debt and equity capital that a company would otherwise require to finance its real estate.
◼ Can can maximize your return on equity
◼ Up to 100% financing / higher advance rates than than conventional debt
◼ Typically longer duration, reducing the time and expense of refinancing debt
◼ Often structured with extension options
◼ Limited or no restrictive covenants
◼ Longer duration locks in interest rate
◼ Operational and financial flexibility
◼ Long-term real estate debt also may have restrictions on loan assumptions by successor owners, whereas leased real estate allows for efficient M&A activity
◼ Real estate leases, on the other hand, make it easier to maintain a stable, reliable capital structure and that can free up cash and produce higher returns lead to higher shareholder value