Sale Lease-Back Analysis

We provide commercial appraisal and valuation services such as performing a sale lease-back analysis. A sale-and-leaseback is a commercial real estate transaction in which one party, often a corporation, sells it corporate real estate assets to another party, such as an institutional investor, or a real estate investment trust (REIT), and then leases the property back at a rental rate and lease term that is acceptable to the new investor/landlord. The lease term and rental rate are based on the new investor/landlord’s financing costs, the lessee’s credit rating, and a market rate of return, based on the initial cash investment by the new investor/landlord.

The reasons and advantages for a seller/lessee are varied, but the most common are: 1.) Help finance expansion of the existing business, purchase new equipment, or invest in new business opportunities, 2.) Help pay down debt and improve the company’s balance sheet, 3.) Help reduce the seller/lessee’s businesss income tax liability caused by the appreciation in value of its corporate real estate assets. In addition, the seller/lessee as a tenant can deduct all rent payments as a legitimate business expense on its annual tax return.

The advantages for an investor/landlord are: 1.) Fair return on the investment in the form of rent during the lease term, and ownership of a depreciable asset already occupied by a reliable tenant, 2.) Long-term, fully leased asset with guaranteed income stream, 3.) For income-tax purposes, the investor/landlord can take an expense deduction for an investment in a depreciable property to allow for the recovery of the cost of the investment.

We specialize in this analysis for NNN properties across the nation. Please contact us for any commercial appraisal and valuation services such as performing a sale lease-back analysis.