Sale-Leaseback Deals May Have Place in Down Market

In an effort to get out of the dismal real estate business and free up operating capital, some large corporations are selling their buildings off but continue to occupy and control them. This concept is known as a “sale-leaseback.”

Sale-leasebacks provide an alternative to traditional financing. Instead of refinancing with a lender, a cash-strapped company can free up the entire value of its building and use the proceeds to pay down debt.

If you are ever approached by a large corporation proposing a sale-leaseback deal, take a close look at the offer before you make a final decision, as an owner, some of the advantages of a sale-leaseback include:

· A fair return on your investment in the form of rent during the lease term;

· Ownership of a depreciable asset already occupied by a reliable tenant;

· A long-term fully leased asset with guaranteed income stream;

· A tax deduction for an investment in depreciable property that allows for the recovery of the cost of the investment.