A sale-leaseback is when a company sells its real estate to an investor and then leases the property back as the tenant utilizing a long-term, triple net lease.  The annual, triple net base rent is usually seven to eleven percent of the sales price of the property in a sale-leaseback transaction.

Companies like Forbes, Home Depot, the  New York Times, and Sallie May utilize the invaluable sale-leaseback financing tool to obtain low-cost capital while significantly enhancing their balance sheets when structuring the sale-leaseback with an operating lease.  The non-existent lending market of today is making the sale-leaseback more popular among companies seeking capital for their operations.

WHY PARTICIPATE IN A SALE-LEASEBACK AS THE SELLER/TENANT

1. Only option in today's economy to raise low-cost capital.  Today's challenging economy finds most businesses needing cash to sufficiently fund its operations.  Traditional sources of capital are virtually non-existent because of the very difficult lending environment.  Increasingly, companies are learning that the efficient sale-leaseback may be their only option to raise low-cost capital while improving their balance sheet in today's difficult economy.

2. Receiving 100% in cash of the real estate's appraised value.  Seller/Tenant usually receives in cash 100% of the appraised value of the property for the sale-leaseback.  Because of the exceedingly difficult lending environment, the rarely approved mortgage or refinance will typically only produce for the owner a sixty percent loan of appraised value while the sale-leaseback will fund 100% of the property's appraised value to seller/tenant.

3. Improvement of the balance sheet.  Seller/Tenant will considerably improve its balance sheet because of the immediate boost in cash with no corresponding increase in debt when utilizing the sale-leaseback.  Operating leases do not appear on the balance sheet as debt and their rent payments are tax deductible. Book income usually increases in the early years of a sale-leaseback, with rent payments typically less than the interest and depreciation with the owner's mortgage. The book value of company assets is effectively understated enhancing the Return on Assets (ROA) for the Seller/tenant.

4.  Retaining operational control of the property.  Seller/Tenant retains operational control of the real estate in a sale-leaseback until vacating the property when using a triple net lease.  The sale-leaseback therefore helps seller/tenant to maintain control of operational costs.

5. Lower after-tax cost than other forms of asset based financing.  Seller/Tenant should have a lower after tax cost when utilizing the sale-leaseback.  The rent under a sale-leaseback is fully deductible over the lease term, making the after-tax cost for Seller/Tenant less than other alternative forms of asset based financing.  Federal income tax laws allow a real estate owner to only depreciate buildings and other physical improvements, but not land. Sale-leasebacks factor the value of the land into the rent and since the rent is fully deductible, a sale-leaseback essentially allows Seller/Tenant  to depreciate the cost of the land in its rent deduction. 

WHY PARTICIPATE IN A SALE-LEASEBACK AS THE INVESTOR/LANDLORD

1. Property price appreciation.  The long-term Investor/Landlord usually experiences property price appreciation which acts as a hedge against inflation.

2. Long-Term, consistent income stream.  Sale-leasebacks usually include a long term fully leased property with a consistent income stream, unlike the constantly changing stock markets.  These long term corporate "guarantees," essentially allow the Investor/Owner to be unaffected by real estate cycles plaguing most segments of today's real estate when acquiring a sale-leaseback. 

3. Favorable tax treatment.  Investor/Landlords utilize the expense deduction for an investment in depreciable real estate to allow for the recovery cost of the investment for income tax purposes.

4.  Minimal if any management responsibility.  Investor/Landlord will enjoy little if any management responsibility when the triple net lease is used.  Many investors buy sale-leasebacks in different parts of the country from where they live because of low or no management responsibility. 

5. Long term, credit tenants.  Many sale-leasebacks offer Investor/Landlord the opportunity to own real estate leased by long term, credit tenants.

WHY HIRE DZ REALTY, LLC TO REPRESENT YOUR COMPANY  IN A SALE-LEASEBACK TRANSACTION  

1. Conduit to hundreds of millions of dollars of investment money.  DZ Realty, LLC is a direct connection to hundreds of millions of dollars of investors that want to purchase the types of real estate sold in sale-leaseback transactions.  Purchasers range from publicly traded companies and insurance companies to private, high net worth individuals. 

2. Completed hundreds of millions of dollars of net leased real estate transactions.  DZ Realty, LLC has completed hundreds of millions of dollars of Net Leased, Single Net Leased, NNN, or Triple Net Leased real estate  over a span of twenty years.  DZ Realty, LLC's experience and knowledge gleaned from these many transactions allow DZ Realty, LLC to make sure its clients receive the best possible terms and transaction efficiency in a sale-leaseback whether the client is the seller/tenant or the investor/landlord.

3. Maximum marketing exposure.  DZ Realty, LLC has access to the largest databases of available real estate for sale in the world which means its clients will enjoy maximum marketing exposure if selling and have many properties to choose among if buying.

4. Worked with some of the world's largest companies.  David Zacharia has worked with some of the largest companies in the world including Wal-Mart, Walgreens, McDonald's, AutoZone, and Aldi Inc. among many others. 

COMPANIES THAT HAVE RECENTLY CLOSED SALE-LEASEBACK TRANSACTIONS

To raise capital at competitive rates, enhance liquidity, and increase earnings in today's challenging economy, large companies JP Morgan Chase, New York Times and Forbes, smaller retail chains like PT's Pub in Las Vegas, and even governments including the states of Arizona and California are turning to the sale-leaseback as the only viable source of financing to substantially increase cash flow and greatly improve their balance sheets.  An extensive list of companies recently involved in sale-leaseback transactions is listed here. 

When considering a sale-leaseback always consult a qualified commercial real estate broker like DZ Realty, LLC , an attorney and accountant.

Please click here for recent Sale Leaseback transactions