Sale-Leaseback an increasingly important strategy to raise capital amid recession and tight lending, says NAI Realvest executive

MAITLAND, FL– Slow economic recovery and tight lending environment have made sale-leaseback transactions an increasingly popular strategy to raise capital and focus a company’s resources on its core profit-making business, says one real estate expert.

Mez Birdie, (top right photo)  CCIM, director of retail services at NAI Realvest, in Maitland said “Companies make a higher return on capital in its core business compared to a lower return on owning real estate. Most companies have profit margins in double digits, while real estate returns are generally in single digits.”

“Real estate can’t earn a company the same sort of returns as its primary business,” Birdie also said. “By selling real estate, a company can reduce its debt, repurchase company stock, and focus its resources on core business lines, thus adding value to the company,” he added.

Birdie said sale-leaseback transactions today are far less rigid than in times past. “Sale-leaseback offers more flexibility than owning, as a company can structure the lease to suit its long or short-term needs.

A properly negotiated lease provide flexible lease terms, such as: right of lease termination by way of property substitution, right to purchase properties, right of first refusal to purchase and lease servicing programs.

 These flexibilities give a company the option to close or relocate poor locations,” he said.

Upcoming changes in Federal Accounting Standards Board (FASB) rules may impact sale-leaseback transactions, Birdie said.

 “On an after-tax basis, sale-leaseback transactions offer significant benefits, as lease payments are tax deductible. FASB rules apply to sale-leaseback transactions.

" To determine if the transaction qualifies as an ‘operating or capital’ lease, accounting and legal departments of the company play an important role in crafting a beneficial sale-leaseback transaction,” he explained.

For more information, contact:
Mez Birdie, CCIM, Director-Retail & Investment Services, NAI Realvest 407-949-0734, Mbirdie@realvest.com;
Patrick Mahoney, President and COO NAI Realvest, 407-875-9989, pmahoney@realvest.com;
Beth Payan or Larry Vershel, Larry Vershel Communications, 407-644-4142