Advantages of Sale-Leaseback Financing
With pressure on companies to increase earnings and improve their balance sheet, corporate America has been shedding non-core assets and concentrating on core competencies. One tool recommended by Emory is a sale-leaseback, a natural evolution for corporate-owned real estate and equipment.

What Is a Sale-Leaseback?
The basic premise of a sale-leaseback is the sale of company real estate and/or equipment to a purchaser who then leases the property back to the seller. In a standard transaction of this nature, a business will either sell property that it already owns or actually buy property in a prime location, then quickly sell it thereafter, obtaining a long-term lease of the property as part of the transaction.

Utilize Fixed Assets
Companies routinely seek financing to pay down debt, expand their business, fund acquisitions, transition out of a lease or construct new facilities. Options include borrowing funds, issuing stock or selling assets, all of which can be expensive and onerous. Sale-leaseback financing provides a company with access to up to 100% of the value of those fixed assets, generating funds that can be used for other corporate initiatives or liquidity, while providing the company control of its facilities.

A Good Source Of Capital
One of the more significant benefits of the sale-leaseback is that it allows businesses to free capital tied up in real estate and/or equipment. The value of those assets remains largely intangible for as long as the business owns the property. As a result, a substantial amount of capital that a company could use more productively to expand or improve its main business is tied to these assets.
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Benefits to the Balance Sheet
Improved Financial Image
A sale-leaseback can improve a company’s financial image. At the same time that it replaces illiquid assets with cash, a company can also remove liabilities associated with the real estate from its balance sheet, a practice called "off-balance-sheet financing." This type of financing does not add debt to a balance sheet. Since lease expenses are factored into a company’s net income calculation, they do not appear as a liability.

Additional Advantages
Other liabilities are also minimized. A properly drafted sale-leaseback arrangement will result in lease payments being deductible for income tax purposes. That portion of mortgage payments on owned real estate attributable to amortization would not be deductible.

The Process
In a typical sale-leaseback transaction, the investor acquires a property and leases it back to the tenant company on a triple net long-term basis. The company maintains investment control with renewal options. The company bears the responsibility for maintaining the premises, insuring the building and paying real estate taxes.

Sale-Leasebacks Are an Emory Expertise
Our relationships and experience with national organizations engaged in sale-leaseback transactions provide significant value to clients electing this route. By soliciting competing proposals from investors in an auction atmosphere, Emory provides clients the best market value and terms & conditions.

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