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

MAITLAND – 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, 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.
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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

About NAI Realvest: NAI Realvest, covering all of Central Florida, is a fully integrated commercial real estate operating company specializing in brokerage, development, investment, leasing and management, consulting and research services in the U.S. and worldwide through NAI Global, an international commercial real estate network with over 325 offices spanning the globe. Since 1978, clients have built their businesses on the power of NAI Global’s expanding network. Extensive services include multi-site acquisitions and dispositions, sublease, tenant representation, lease administration and audit, investment services, due diligence and related consulting and advisory services. To learn more, visit www.NAIrealvest.com.