{"id":3002,"date":"2020-04-21T12:20:06","date_gmt":"2020-04-21T16:20:06","guid":{"rendered":"https:\/\/www.lee-associates.com\/pennsylvania-dev\/?p=3002"},"modified":"2022-12-28T13:30:32","modified_gmt":"2022-12-28T18:30:32","slug":"5-benefits-of-a-sale-leaseback","status":"publish","type":"post","link":"https:\/\/www.lee-associates.com\/easternpa\/2020\/04\/21\/5-benefits-of-a-sale-leaseback\/","title":{"rendered":"5 Benefits of a Sale-Leaseback"},"content":{"rendered":"
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[Updated August 18, 2021]<\/h3>\n

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If you\u00a0own\u00a0a commercial property\u00a0and want to\u00a0expand or\u00a0you\u00a0need capital to invest in your business,\u00a0you may want to consider\u00a0a sale-leaseback. A sale-leaseback\u00a0occurs\u00a0when a property owner sells\u00a0a\u00a0property but continues\u00a0operating\u00a0it by leasing the property\u00a0back\u00a0from the new owner.<\/p>\n

A sale-leaseback deal can offer advantages to both the seller and the buyer, or the lessee and the lessor, respectively. If you are a seller, you can enjoy the following sale-leaseback benefits.<\/p>\n

1. Access to Capital<\/h2>\n

As\u00a0the seller, you can\u00a0pull\u00a0your\u00a0money out of the real estate through the sale. You\u00a0can then\u00a0reinvest this money\u00a0into your business, where\u00a0you will\u00a0likely get a higher ROI. At the same time, you also retain possession of the property and can continue using it for the lease term.<\/p>\n

Typically, you will receive more cash from a sale-leaseback than you will from conventional mortgage financing. Since capital gains tax can reduce the cash you make from a sale, a sale-leaseback in which the property sells at a small gain or loss is usually the most advantageous obvious.<\/p>\n

2. Improved Balance Sheet<\/h2>\n

With a sale-leaseback, you as the seller replace a fixed real estate asset with cash proceeds from your sale.\u00a0The sale converts a long-term non-liquid asset into working capital and removes the mortgage from the balance sheet. This translates into less debt.<\/p>\n

For an operating lease, your rent obligation is typically disclosed in a footnote on your balance sheet, not as a liability. This may lead to an increase in your current ratio, which can improve your position if you want to borrow additional funds in the future.<\/p>\n

3. Tax Benefits<\/h2>\n

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When deciding whether to do a sale-leaseback, you may want to consider the tax implications. As the seller, you can enjoy several significant income tax advantages, offering you savings and additional cash.<\/p>\n

One of the main tax benefits of a sale-leaseback is that rental payments are fully tax-deductible. With conventional mortgage financing, only interest and depreciation can be deducted. Another tax benefit is that sale-leaseback investment properties are usually held for use in a business and qualify for capital gain-ordinary loss treatment. While retaining the use of the property, you can also choose a sale-leaseback to time the recognition of a gain or loss.<\/p>\n

When leasing, you are able to write off the entire rent payment\u00a0\u2014 in ownership, you can only write off the interest portion of your mortgage payment.<\/p>\n

4. Control Over\u00a0Property and\u00a0Lease Terms<\/h2>\n

With the sale of a commercial property, one of the major concerns\u00a0surrounds the potential loss of control over decision-making.\u00a0The seller\u00a0or\u00a0operator has more leverage in lease term negations in this scenario than a traditional lease.<\/p>\n

With a sale-leaseback, you can agree to a long-term lease that allows your tenant to maintain control of the property and how their business is run. Under the structure of an Absolute NNN lease, the tenant or business will pay all operating expenses.<\/p>\n

5. Continuity<\/h2>\n

One of the biggest objections to the sale of a commercial property is that the business operating in the building will experience disruptions to ongoing operations. Fortunately, with a sale-leaseback, there is no downtime. The seller\u00a0or\u00a0operator is able to stay open throughout the transaction,\u00a0unlike a traditional sale which would involve a move, among other things slowing production.<\/p>\n

Learn More About Sale-Leaseback Transactions<\/h2>\n

At Lee & Associates of Eastern Pennsylvania LLC, we provide commercial brokerage services to multiple sectors of Central and Eastern Pennsylvania, including the industrial, investment, land and office sectors. As a top commercial real estate company, we can help you find a property that allows you to grow and flourish.<\/p>\n

Our offices are located in Central Pennsylvania at\u00a04550 Lena Drive, Suite 104,\u00a0Mechanicsburg, PA, USA 17055,\u00a0and in suburban Philadelphia at\u00a0220 W. Germantown Pike, Suite 200,\u00a0Plymouth Meeting, PA, USA 19462.\u00a0If you want more information about sale-leaseback deals,\u00a0contact us<\/a>\u00a0today.<\/p>\n

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Read More About Commercial Property Leasing<\/p>\n