Reasons for Business Property Owners

The number one reason business property owners consider sale-leasebacks is the sale can free up their corporate capital thereby providing more cash available to be used in expansion or in other areas of the business. Companies like Home Depot, Walgreen's, CVS, McDonalds and Starbucks all lease their property. The reason is that long-term leases take the real estate asset and subsequent debt off their books and place it on the investor's. Sale-leasebacks can be one of the strongest tools to help a company grow. Retail, industrial, office or manufacturing properties with real estate market values between $300,000 and $20,000,000 per property can all be good candidates for sale leasebacks.

Sale-leasebacks can also provide an exit strategy for the business owner, by separating their largest asset (the real estate) from the rest of the business. Selling the business along with what is frequently the largest asset on the balance sheet can greatly affect the saleability of the business. By selling the property 5-10 years prior to the owner's planned exit, the company improves its flexibility and marketability of the company.

Tax advantages can be another reason why one would engage in a sale leaseback. Depreciation and interest write-offs typically decrease the longer property is held on the balance sheet, effectively lowering tax deductions. Leases, if structured properly, can provide a consistent deduction for the entire amount of the lease and reduce tax liability. 

 Lastly, sale-leasebacks can eliminate debt, freeing up the balance sheet and providing credit worthiness.