What is a sale-leaseback?
A sale-leaseback in commercial real estate is a unique type of transaction. In a sale-leaseback, the seller of the property is the tenant of the property. He/she sells the building, but signs a lease to operate the business in the building. Typically, the seller signs a longer lease that is triple net, which means the tenant is responsible for all of the real estate expenses.
What are the advantages of a sale-leaseback for the seller?
There are a few advantages for the seller in transacting a sale-leaseback. The biggest advantage is cashing out the equity in the building with the sale of the property. The seller could want/need this money for a number of reasons. The seller could want the money to help grow the business, or he/she could want the money as he/she nears retirement. The second advantage of a sale-leaseback would be that the seller/tenant gets to stay in the same building, and would be able to negotiate the lease term. In this type of transaction, the tenant has the ability to establish his or her own lease length and structure.
What are the advantages of a sale-leaseback for the buyer?
The biggest advantage for the buyer is that it gives them a look at all the seller’s financials, and it could give the buyer a good return on a low risk investment. If the seller’s financials are solid, then the buyer knows that the business will be a tenant for the remainder of the lease.