Most large corporations have a significant portion of their balance sheets tied up in illiquid real estate.  The most common sources of funds available to these entities are through the bond market and conventional debt financing.  A third and more effective source of financing is the sale-leaseback, in which the owner of a real estate asset sells the property for current market value and then instantly leases it back, usually on a long-term basis.

A sale-leaseback of a corporation’s headquarters building or other facilities allow the company to make use of its captive equity to provide working or investment capital at a cost substantially less than their own long-term debt.  It also generates increased revenue and return on investment as well as allowing the company to maintain virtually all of the control associated with property ownership.

A summary of the relationship between a sale-leaseback and conventional debt financing follows. In this difficult lending environment, the sale-leaseback may present a viable funding alternative to generate capital for immediate use within your business.

 

-Jerry Monash

Gerald Monash, CCIM is Executive Vice President at NAI Global.  Jerry leads NAI’s Investment Services Group and is a loan sales specialist on NAI’s Special Asset Solutions team.