Sale Leaseback A sale leaseback is a financing technique that provides an opportunity to raise cash for your business. It takes place when a business sells real estate it already owns to a third party for its fair market value ('the sale') and then immediately enters into a long-term net lease and continues to
occupy the property (the 'leaseback'). Alternatively, the business identifies an existing building that it desires to use. It then allows a third party to purchase that property and immediately enters into a long-term lease to occupy the property.

If real estate is not strategically important to your operations, why own it? By completing a sale/leaseback with us, you can unlock the value in your real estate, increasing your cash on hand that can be used to grow your primary business. You will be paid full market value for your property which will provide cash to expand operations or pay down existing debt. There is no fee to your company.


Mission
To assists our clients nationwide to raise funds for new large-scale projects, and business expansion by purchasing and leasing back the client's existing fixed physical facilities.


Opportunity
Clients’ use our financing group’s sale leaseback option to free up funds invested in existing low-return fixed physical facilities in order to reinvest those funds in new high-return projects, business ventures, or other activities.


Sale Leaseback Financing

Purchase. Our financing group purchases an existing fixed physical facility (not the business activity conducted in that facility) from the client for a single purchase payment.

Leaseback. The client leases back the existing facility from our financing group for approximately 15 to 20 years, make periodic lease payments, and continue to own and control the business activity conducted in the facility, and retain all profits generated by the business activity.

Financing. The client uses the cash payment, from the sale of the existing facility through our financing group, to finance the construction of a new physical facility, to expand the business, or for any other purpose.

Option. At the end of the lease period, the client has the option to renew the lease on the existing facility, purchase the existing facility back, or move the business activity out of the existing facility and terminate the relationship.


The program may be used by corporations, developers, government agencies, or any entity that meets the sales-leaseback requirements. We accept the following types of infrastructure or real estate facilities; office complexes, hospitals, airports, industrial estates, corporate headquarter buildings, large manufacturing plants, refineries, retail stores and large chain store.

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Current Sale Leaseback Trends The current sale leaseback market in the United States is primarily being driven by office products. The typical criteria for sale-leaseback investments are summarized: (1) Purpose: To liquidate loan term assets, thus improving the balance sheet while retaining control of the property

(2) Rental Rates: Calculate as a percentage of the purchase price, usually with embedded escalation throughout the lease term.

(3) Term: 15 to 20 year lease terms, with options to include up to four 5 year renewal periods

(4) Advances: 100% of fair market value, usually $20 million and above

(5) Property: Conveyed via warranty deed, must have fee simple ownership interest in property; ground lease as exception only.

(6) Preferred: office, industrial (distribution, warehouse, manufacturing and R&D) medication and retail

(7) Physical Facility: The client must own an existing fixed physical facility that our group can purchase for US $3 Million to $50 Million  or more.

(8) Lease: The client must intend to lease back the existing facility from our group for a period of 15 to 20 years.

(9) Credit Rating: The client must have an investment grade credit rating for long-term USD debt, or, credit enhancement.

The investment grade credit rating must be issued by Standard & Poor's, Moody's, or Fitch Ratings. Credit enhancement may be obtained from a bank, insurance company, or other entity with an investment grade credit rating for long-term USD debt.

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The Negotiation Table
Since tradition sale leaseback investors want security first and upside second, the key issues in negotiating a sale leaseback is as follows:

•  The security of the cash flow is paramount; investors don not want
    the burden of operating risk.

•  Investors will want rents set at fixed amounts that escalate at 2% to
    3% percent to keep pace with inflation.

•  Sale leaseback investors often value the reversion at less than
    100% of the current value; often times, the landlord is tax
    motivated and is recognizing significant levels of depreciation.

•  With a publicly traded tenant, the lease may not involve any
    pre-determined sales prices at which the tenant is obligated to buy
    (or has option to buy) without voiding the opportunity for off-
    balance sheet financing.

•  The sales price at the end of the lease can vary drastically (10% -
    20%) if the property is sold encumbered or unencumbered by
    management. Accordingly, investors will want the assets to be sold
    unencumbered.

•  Investors will want to monitor not only the financial viability of the
    asset but of the entity that provides the guarantees.

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Financial Advantages

•  A sale leaseback essentially provides 100% financing to the
    business owner. A seller/lessee (tenant) looking to build does not
    have to tie up cash in the form of a down payment required by
    conventional banks. A seller/lessee who already owns the property
    can unlock the equity in the real estate and turn that equity into
    cash.

• If properly structured as an “operating lease,” the lease does not
   add short- or long-term debt or the real estate asset to the balance
   sheet. Thus, certain financial ratios, such as the debt-to-equity-ratio,
   the current-ratio and the return-on-assets-ratio are actually
   improved. Because Generally Accepted Accounting Principles
   (GAAP) omits this transaction from the balance sheet, the borrowing
   capacity of the seller/lessee may be increased.


SUBMISSION REQUIREMENTS
 
Contact
Your name & title, company & mailing address, telephone, fax, email, and web address.

Existing Facility
Is there an existing facility that can be purchased? What is the approximate market value of the existing facility in US dollars? What entity owns the existing facility? What entity owns the land on which the existing facility is located? Briefly describe the existing facility.

Leaseback
What entity intends to lease back the existing facility?

Credit Rating
Does the entity intending to lease back the facility have, or can it obtain, an investment grade credit rating for long-term foreign currency debt from Standard & Poor's, Moody's, or Fitch? In the alternative, can the entity obtain credit enhancement from a third party, such as a sovereign government or insurance company that has an investment grade credit rating?


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