In a sale-leaseback (or sale and leaseback), a business sells its industrial realty to an investor for cash and simultaneously enters into a long-term lease with the new residential or commercial property owner. In doing so, the business extracts 100% of the residential or commercial property’s value and converts an otherwise illiquid asset into working capital, while keeping full functional control of the facility. This is a great capital tool for companies not in the service of owning property, as their property assets represent a substantial money worth that could be redeployed into higher-earning sectors of their service to support growth.

What Are the Benefits?

Sale-leasebacks are an appealing capital raising tool for many business and provide an option to traditional bank funding. Whether a business is aiming to invest in R&D, broaden into a new market, fund an M&A transaction, or merely de-lever, sale-leasebacks work as a strategic capital allowance tool to fund both internal and external development in all market conditions.

Key Benefits Include:

- Immediate access to capital to reinvest in core service operations and growth initiatives with higher equity returns.

• 100% market price realization of otherwise illiquid assets compared to financial obligation options.
• Alternative capital source when conventional financing is not available or limited.
• Ability to retain operational control of property without any disruption to everyday operations.
• Potential to gain a long-lasting partner with the capital to money future expansions, developing restorations, energy retrofits and more.
  
  Who Receives a Sale-Leaseback?
  
  There are several aspects that identify whether a sale-leaseback is the right suitable for a company. To be qualified, companies need to fulfill the following criteria:
  
  Own Their Real Estate
  
  The first and most apparent criterion for certification is that the company owns its real estate or have a choice to buy any existing leased space. Manufacturing facilities, corporate headquarters, retail areas, and other kinds of property can be prospective prospects for a sale-leaseback. Unlocking the worth of these locations and redeploying that capital into higher yielding parts of business is an essential driver for companies pursuing sale-leasebacks.
  
  Want to Commit to Operating in the Space
  
  While the term of the lease in a sale-leaseback can vary, most investors will want a commitment from a future tenant to occupy the area for a 10+ year term. Assets important to a company’s operations are frequently great prospects for a sale-leaseback because a company is prepared to sign a long-term lease for those areas. This makes it a more appealing financial investment for sale-leaseback investors as they have more security that the occupant will remain in the facility for the long term.
  
  Have a Strong Credit Profile
  
  Companies do not need to be investment-grade quality to pursue a sale-leaseback. However, some credit history is typically required so the sale-leaseback investor understands that the company can make rental payments throughout the lease. Sub-investment-grade companies are still eligible as long as they have a strong performance history of and cashflow from which to judge their credit reliability