WE3 Agency assists commercial real estate owners in finding a long-term capital partner fluent in the sale / leaseback process.
We have the real estate know-how along with the market intelligence and the industry connections necessary to ensure your business success through, leasing an existing property or executing a build-to-suit program from the ground up tailored to your individual needs.
When Should a Business Owner Consider a Sale Leaseback?
When an Alternative to Mezzanine or Senior Debt is Advantageous
When Capital is Needed for Growth
When Undergoing a Corporate Restructuring or Seeking Exit Financing
When Packaging a Business for Sale
Leasebacks are agreements where sellers of assets lease assets back from buyers. With leaseback arrangements, the arrangement details, like the duration of leases and lease payments, are decided straight after the asset sale. The asset sellers become the lessees, and the buyers become the lessors.
Typically, companies need to grow their capital. This capital is acquired by equity and/or debt financing. While both of these methods can be effective, they can also result in problems if not managed correctly. Debts have to be repaid and are recorded on company balance sheets as debts. Equity doesn't have to be repaid, however, it is acquired in exchange for ownership. Leasebacks enable this to occur.
Companies that have expensive assets, or builders, use sale-leaseback arrangements more than anyone else. Leaseback arrangements are helpful when companies need the money invested in assets for other investment purposes, even though the assets are required for them to operate properly.
Also, leaseback arrangements can offer sellers extra tax breaks. Lessors benefit in that they receive guaranteed leases, with reliable payments over a specified period.
Equity Doesn't Have to be Repaid, However, it is Acquired in Exchange for Ownership
While sale-leasebacks are treated differently to debts, from an accounting perspective, they are not typically classed as financing. As a result, they don't feature on balance sheets. For this reason, many analysts put capitalized leases in with long term debts, when calculating the debt obligations of companies.
A leaseback, or sale-leaseback as it is sometimes called, is not equity or debt. It is best described as a hybrid financial product. Under these arrangements, companies do not increase their debt obligations but gain access to funds via asset sales.
This could be likened to a pawn shop that is specially designed for corporations. Companies could visit this shop and receive a certain quantity of funds, in return for their valuable assets. Unlike the customers of normal pawn shops though, companies would not be expected to buy their assets back in many cases.