New lease accounting standards are currently being developed in a joint project between the IASB and FASB that could result in a complete overhaul of the way in which leases are reported in financial statements. More >
As the economy strengthens and vacancies begin to decline, landlords and owners will begin to try to recover some of the rental rate ground they lost during the recession. The recovery does not appear to be swift, but landlords will need some relief going forward or they will not be able to maintain the properties to the prior standard. More >
In financial markets such as we are experiencing now, financing real estate for operations or investments can be a challenge. An excellent alternative that remains attractive for corporations and investors is the Sale Leaseback. Essentially, the sale leaseback enables a corporation to make use of the captive equity in its real estate at a cost that is generally lower than its return on equity or long term debt costs. Utilizing long term leases with renewal options, the corporation maintains operational control of its facilities without having to tie up its capital. Further, a sale leaseback provides 100% leverage in comparison to mortgages that generally provide 60% to 70% leverage. From the standpoint of the investor, the sale leaseback offers several advantages: More >
It is not unusual for a portfolio of leases to have many common lease termination dates. For example, if the company’s fiscal year is a January to December period, it is likely that the company has a lot of leases that end on December 31. It is recommended that the lease expiration dates be graphed with respect to time. The concept here is to look at the upcoming work for the next three years and see if there are bunches or waves of work. In the event that there are such occurrences, then short term lease extensions can be put in place to even out the workload.
In the case where companies have multiple assets in a single city or region, it is also not unusual for the lease expiration dates to be different. This variance does not allow the firm to evaluate the costs and benefits of consolidation. Accordingly, the strategy is to make the leases in a city or region co-terminus. This creates a situation in the future where the executive team can review all the locations and make a business decision on the merits of consolidation or allow the business units to maintain independent facilities. The independent facilities may remain in events such as one business is more variable than another or the company may consider a business divestiture at a later date, or the reward structure is established in such a way that independent rather than shared assets work better for the calculation on incentives.
Ted Parcel is Executive Vice President of Corporate Services for NAI Global.
CSC Sugar to Use Facility to Refine and Produce Liquid Sugar for Food Industry
CSC Sugar has leased the Bar Mill building in the Keystone Industrial Port Complex (KIPC) in Fairless Hills, Pennsylvania. CSC Sugar will use the industrial property to import raw sugar in bulk via ship and rail, and refine the sugar into a liquid product called Sugaright that will be provided to food manufacturers as an additive in beverages, gums, candies and other foodstuffs. More >