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In a sale-leaseback (or sale and leaseback), a company offers its business genuine estate to a financier for cash and concurrently enters into a long-term lease with the brand-new residential or commercial property owner. In doing so, the business extracts 100% of the residential or commercial property's worth and transforms an otherwise illiquid possession into working capital, while maintaining full operational control of the center. This is a fantastic capital tool for companies not in business of owning property, as their property properties represent a considerable cash worth that might be redeployed into higher-earning segments of their company to support development.

What Are the Benefits?

Sale-leasebacks are an attractive capital raising tool for numerous business and use an option to standard bank funding. Whether a business is aiming to purchase R&D, expand into a new market, fund an M&A deal, or just de-lever, sale-leasebacks serve as a tactical capital allowance tool to fund both internal and external growth in all market conditions.

Key Benefits Include:

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

• 100% market value realization of otherwise illiquid properties compared to financial obligation alternatives.
• Alternative capital source when traditional funding is not available or limited.
• Ability to maintain operational control of realty without any disruption to day-to-day operations.
• Potential to gain a long-lasting partner with the capital to fund future growths, constructing restorations, energy retrofits and more.
  
  Who Qualifies for a Sale-Leaseback?
  
  There are a number of factors that identify whether a sale-leaseback is the right suitable for a company. To be eligible, business need to fulfill the following criteria:
  
  Own Their Realty
  
  The very first and most obvious criterion for qualification is that the business owns its property or have an option to buy any existing leased area. Manufacturing facilities, home offices, retail areas, and other kinds of genuine estate can be potential candidates for a sale-leaseback. Unlocking the value of these locations and redeploying that capital into higher yielding parts of business is an essential driver for companies pursuing sale-leasebacks.
  
  Be Willing to Commit to Operating in the Space
  
  While the regard to the lease in a sale-leaseback can differ, most investors will desire a dedication from a future occupant to inhabit the space for a 10+ year term. Assets vital to a company's operations are frequently good candidates for a sale-leaseback due to the fact that a business wants to sign a long-lasting lease for those locations. This makes it a more appealing investment for sale-leaseback financiers as they have more security that the occupant will remain in the center for the long term.
  
  Have a Strong Credit Profile
  
  Companies do not require to be investment-grade quality to pursue a sale-leaseback. However, some credit report is generally needed so the sale-leaseback investor understands that business can make rental payments over the course of the lease. Sub-investment-grade companies are still eligible as long as they have a strong performance history of profits and cashflow from which to judge their credit reliability; however, they may need to discover an investor who has the underwriting capabilities to assess their company. Minimum earnings and success requirements will vary based company to company, so it's best to ask about this upfront before engaging with any specific sale-leaseback partner.
  
  Qualities to Search for in a Sale-leaseback Investor
  
  When thinking about a sale-leaseback, finding the ideal purchaser is crucial in order to make sure a company is maximizing the worth of their realty. Here are a few of the key qualities to try to find in a sale-leaseback investor.
  
  Experience
  
  An educated financier can offer more versatility and guide sellers through the procedure, developing personalized offer structures to meet all of a business's distinct goals and avoid prospective mistakes. Additionally, experienced investors can usually browse all market cycles and offer certainty of close (some in as low as 1 month), making sure the deal closes in a timeframe that works for the company and their fiscal requirements.
  
  An All-Equity Buyer
  
  When searching for a sale-leaseback partner, finding an all-equity purchaser is very important, especially when dealing with timing restraints. All-equity buyers don't have to stress about third-party debt or funding contingencies, implying there's less possibility of a re-trade in the late stages of negotiation. All-equity buyers can likewise typically close much faster as they do not need to wait on approval from banks or loan providers, supplying a smoother process in general.
  
  A Long-Term Real Estate Holder
  
  Finding a long-term investor is vital. Sellers don't want someone who is simply wanting to flip a residential or commercial property for a fast revenue. Instead, look for an investor who will remain a dedicated partner to you over the long run and one that can supply capital for future jobs such as expansions, renovations, or energy retrofits.
  
  Diverse Knowledge and Experience
  
  Different markets, residential or commercial property types and places require unique knowledge to efficiently and effectively partner with sellers to structure an offer that attend to the needs of all celebrations. Working with an investor with experience in the company's specific industry, residential or commercial property type and/or country makes sure that all potential dangers and opportunities are considered before participating in a sale-leaseback contract. For example, if you are considering a cross-border, multi-country deal it's vital you look for an investor with regional teams in those nations who speak the language and understand the local rules.
  
  When checking out a sale-leaseback, another term business might come across is a build-to-suit. In a build-to-suit, a company funds and handles the building and construction of a new center or expansion of an existing one to meet the specs of a potential or existing occupant. Upon conclusion, the company gets in into a long-lasting lease, comparable to a sale-leaseback. For business searching for a brand-new residential or commercial property, this is a great option that requires no in advance capital.
  
  The Main Benefits of Build-to-Suits Include:
  
  - Development of a custom-built facility in a place of the .
• No in advance capital required, making it possible for the business to maintain capital for its organization.
• Ability to retain operational control of the facility post building and construction.
• Potential to gain a long-lasting partner with the capital to money future growths, developing remodellings, energy retrofits and more.
  
  While sale-leasebacks may seem intimidating for companies who have never pursued one, dealing with an experienced and well-capitalized investor can make the procedure simple. When working with a financier like W. P. Carey, sellers can guarantee they are working with a partner that can comprehend the unique requirements of their organization while having the included option of closing in as little as 1 month and the added benefit of gaining a long-lasting partner who can support its occupants through versatility and additional capital should they wish to pursue follow-on tasks such as growths or energy retrofits as their business and property requires evolve. In all market conditions, sale-leasebacks are a great financing tool to unlock otherwise illiquid capital that can be reinvested into a company's business to support future growth.
  
  Think a sale-leaseback is right for your business? Contact our group today!
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