FAQ
SALE-LEASEBACK: FREQUENTLY ASKED QUESTIONS
A Sale-Leaseback unlocks capital for commercial building owners by selling a property and simultaneously entering into a long-term triple-net-lease for that property which gives the building owner 100% control of the land and building with no disruption to business operations.
The building owner who sells a commercial property in a Sale-Leaseback maintains 100% control of the land and building with no disruption to business. The investor who purchases the property has no landlord responsibilities under the NNN lease.
The main tax advantage of a Sale-Leaseback is that lease payments are fully tax deductible unlike a traditional mortgage loan where the borrower is only able to deduct interest and depreciation. The investor who purchased the asset is able to deduct interest and depreciation.
A mortgage is limited by the lender's loan-to-value requirements which reduces the amount of equity available to the commercial property owner, currently 60-70% of the property value. A Sale-Leaseback provides 100% equity of the Fair Market Value of the property.
Unlike a traditional mortgage loan where only a percentage of the value is extracted from the property, a Sale-Leaseback extracts 100% of the property's market value so the seller receives more cash.
Some top reasons a commercial building owner might want to consider a Sale-Leaseback include:
Converting Equity to Cash
In a Sale-Leaseback, the building owner retains possession and control of the property while unlocking capital needed to pay down debt or expand business operations.
Alternative to Mortgage
A Sale-Leaseback unlocks 100% of the building's equity while traditional mortgage loan is limited to the lender's loan-to-value requirements yielding only 60-70% of the property's value on average.
Improves Balance Sheet and Credit
In a Sale-Leaseback, the commercial property owners replaces a fixed asset with cash which may result in an increase in the ratio or current assets to current liabilities.
Deter Corporate Takeovers
According to CCIM, undervalued real estate on a company's books is often a target for corporate raiders. A timely liquidation through a Sale-Leaseback may serve as a deterrent by providing the company with capital to resist the takeover in addition to adding a long-term lease to the books which is not as inviting to corporate raiders as undervalued real estate.
Some advantages for buyers in a Sale-Leaseback include:
Higher Return on Investment Rate
The buyer typically receives a higher rate of return than in a traditional loan arrangement.
No Landlord Responsibilities
Under the triple-net-lease "NNN" the seller retains 100% control of the land and building to continue business operations and the buyer has no landlord responsibilities.
Predictable and Secure Return Rate
The buyer receives steady and predictable income through lease payments under the triple-net-lease.
Depreciation Tax Deductible
The buyer is able to use the building's depreciation as a tax deduction to offset the income.
Reliable Tenant
In a Sale-Leaseback, the buyer is receiving a built-in tenant.
To Schedule Your Phone Consultation
Net Lease Realty Partners has a proven track record for finding the right buyer for our client’s commercial investment properties and for helping individual investors maximize their returns. To schedule your phone consultation to discuss the sale of your commercial property or to discuss the purchase of a Sale-Leaseback:
