Sale-Leaseback is one of the best ways for a property owner to obtain cash flow or raise capital, without disturbing a property’s current state of affairs. In this scenario, a property owner sells the property to an external investor and leases it back immediately, thereby becoming the tenant of the formerly owned property(nnn real estate). Although this sounds strange, it is a way that a property owner can still control and utilize a piece of land, only for rent, rather than a capital outflow.
The entity who buys the Sale-Leaseback property is actually the investor. The purchaser receives a property with an established business, a vetted tenant, and rent with rock-solid hopefully, NNN lease terms(nnn Sale-Leaseback).
The former owner of the Sale-Leaseback property who now becomes a seller benefits in the following ways:
- Cash flow from sale of the property, which can be used to payoff debt, fund growth or to invest elsewhere for greater returns than currently;
- A NNN lease of the property for a long-term with favorable terms, thereby regaining the control of the land formerly owned;
- Enjoys the asset without the liability and risks of ownership; and
- Tax deductions due to the encumbrance of the NNN lease and expenses under the lease
Insight into Sale-Leaseback – Sale-Lease back is basically a low or no risk proposition(nnn real estate). Raising capital or borrowing capital via other modes of asset finance and banks can add encumbrances to a property, which may not exist under Sale-Leaseback.
For the best guidance on Sale-Leaseback transactions call your expert commercial real estate advisors at the Triple Net Investment Group.