Sale Leasebacks on the Rise As Owners Seek Cash

Les Shaver
May 26, 2020 at 12:48 PM

The sale/leaseback financial arrangement may also be able to provide the tenant with more favorable rent terms thanks to record-low interest rates. As the realities of COVID-19’s impact on the economy become clearer, businesses are looking to strengthen their capital reserves for immediate needs and other core activities. A growing number of retailers, logistics firms and other corporate real estate users are selling their assets for an influx of cash. By using leasebacks, they are able to retain possession of their facilities.

“They lease the asset to a third-party buyer, then they lease that back under a traditional long-term triple-net operating lease,” says Jeff Berryhill, a principal at Stonemont Financial Group. “The objective is to be able to redeploy that capital for a higher and better use.”

Right now, there are a lot of places where these sellers can put that capital. “The question is, with all the other opportunities they have to deploy capital, whether that is to pay down debt, make acquisitions or invest in technology or people, should they also own that real estate/?” Berryhill says. “So, I think the sale/leaseback transaction is getting a lot of interest in the market right now.”