ALLIANCE CAPITAL MARKETS (ACM) SALE-LEASEBACK ADVANTAGES
The sale-leaseback of corporate properties can offer organizations many benefits:
- Sale-Leaseback transactions allow your company to free up capital to pay down debt, fund mergers and acquisitions or reallocate capital for more productive uses.
- Your company maintains full operational control of the property.
- Tax benefits – offsetting lease costs as an operating expense.
- Your real estate becomes liquid by monetizing low/non-return assets.
- There are possible repurchase options available through various transaction structures which will meet FASB 13/98.
- Transactions can be brought to market within 21 days and completed in 60-120 days.
- Almost all transactions are structured as off-balance sheet operating leases. Therefore, the corporation’s balance sheet no longer reflects a large, illiquid asset carried at a below-market value.
- When compared to mortgage debt the leaseback transaction produces greater leverage, typically 30-35% more.
- The typical weighted average cost of capital (The blended cost of the debt component and equity hurdle being considered or typical operating margin of the company) for most organizations is approximately 14-18%. A leaseback is typically completed at a reversion
rate of .04 to .09 depending on credit and term.