is typically a commercial real estate
transaction in which one party, often a corporation
, sells its corporate real estate assets
to another party, such as an institutional investor
, or a real estate investment trust (reit
) , and then leases
the property back at a rental
rate and lease
term that is acceptable to the new investor
In a sale-and-leaseback, the lease term and rental rate is based on the new investor/landlord's financing costs, the seller/lessee credit rating, and a market rate of return based on the initial cash investment by the new investor/landlord. The reasons and advantages for doing a sale-and-leaseback by a seller/lessee is varied, but the most common are:
- Help finance expansion of the existing business, purchase new plant equipment, or invest in new business opportunities.
- Help pay down debt and improve the company's balance sheet.
- Help reduce the seller/lessee's business income tax liability caused by the appreciation in value (land only) of its corporate real estate assets. In addition, the seller/lessee as a tenant can deduct all rent payments as a legitimate business expense on its annual tax returns.
The advantages of doing a sale-and-leaseback by an investor/landlord are:
When considering to do a sale-and-leaseback transaction always consult with a qualified commercial real estate broker , attorney, and accountant.
- National Association of Real Estate Investment Trusts
- Society of Industrial and Office Realtors