• justinlanglois

Growing Your Business Through Sale-Leasebacks

One tool that many business owners are finding useful during this economic crisis is the sale-leaseback. This is a real estate transaction allowing a company to sell a property and lease the property back from the new owner. Business owners sell their properties but can continue normal business operations.

The most common question from prospective buyers when pursuing a sale-leaseback is “Why does the company want to sell their owner-occupied real estate?” There are a number of reasons why and here are the most common:

  1. Free up capital

  2. Pay down existing debt

  3. Put money aside for a rainy-day

  4. Invest in technology

  5. Invest in their people

  6. Buy out a competitor

Sale leasebacks are particularly useful as an alternative to taking out a loan and incurring additional debt. A loan shows up on a company’s balance sheet as debt, whereas a leaseback transaction results in liability going down and current assets increasing in the form of cash and a lease agreement.

Sale-leaseback arrangements can benefit both parties: the seller/lessee and the

buyer/lessor. The seller/lessee frees up capital to grow their business, removes the risk of owning the asset and improves their balance sheet. On the other hand, the buyer/lessor purchases an asset with a guaranteed lease that is usually triple net (NNN), meaning it carries minimal landlord responsibilities. The investor also reaps the rewards when tax time rolls around; the property can be depreciated over time through cost segregation, resulting in major tax benefits.

The commercial real estate market continues to gain momentum in the face of COVID-19, resulting in a favorable time to sell owner-occupied real estate. Businesses and corporations that need to access the money tied up in their real estate should consider a sale-leaseback arrangement to provide a source of liquidity, enabling business growth and development beyond the pandemic.

Justin Langlois, CCIM is a Commercial Real Estate Advisor with Stirling Investment Properties servicing Baton Rouge, Louisiana and surrounding markets. Please reach out to Justin to discuss your real estate investment strategies.

52 views0 comments

Recent Posts

See All

Stirling Properties

8550 United Plaza Blvd. | Suite 101

Baton Rouge, LA 70809

Licensed in the State of Louisiana

  • Facebook - White Circle
  • LinkedIn - White Circle
  • Twitter

© 2020 by Justin Langlois CRE