Is a Sale and Leaseback Transaction Right for Your Business?

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Is a sale and leaseback transaction right for your business?

The UK saw a measurable slowdown in real estate investment activity in 2022. Investors have been cautious about acquiring new properties over worries of lower-than-expected yields. One exception has been the sale and leaseback transaction. Such transactions remained strong last year. We expect them to be strong this year as well.

Is a sale and leaseback right for your business? Perhaps. Selling and leasing back your property does offer some very tangible benefits. Whether or not those benefits would be good for the bottom line is up to you to decide. But if you evaluate your situation and determine a sale and leaseback is the right way to go, we are here to help. We are currently looking to add commercial properties of all sorts to our portfolio.

More About Sale and Leaseback

If you are not familiar with the sale and leaseback transaction, it is fairly straightforward. You sell your commercial property to an investor, then lease it back from the buyer as a tenant. Nothing changes in terms of how you run your business. You stay in the same space and continue doing what you were doing before. The only difference is that you no longer own the property. You lease it.

Reasons Owners Sell and Leaseback

Perhaps it would be helpful to know some of the reasons property owners choose to sell and leaseback. These are many and varied, and they may or may not apply to your situation. Here are just a few of them:

  1. The Need for a Cash Injection

    Owning commercial property is good, but it doesn’t directly generate revenues unless leasing it is part of your business. So in essence, you have cash locked up in your property by way of equity. Many of our sellers choose to sell and leaseback in order to unlock that equity. They end up with a cash injection.

    At a time when managing cash flow can be challenging, an injection of cash can be a big boost for businesses trying to stay afloat. A cash injection today could keep your business going until the economy begins recovering.

  2. The Need for Capital Improvements

    Similar to the cash injection principle is raising cash to address much-needed capital improvements. Your business may need to invest in new equipment. You might need a new software platform. Either way, the equity in your property represents the necessary resources. Many of the buyers we have purchased from have turned around and put the proceeds back into their businesses via capital improvements.

  3. A Desire to Get the Best Deal Now

    Still another reason for the sale and leaseback transaction is getting the most for a piece of property right now. For example, we have obtained properties from sellers who were planning to sell in the future but decided to sell right away because they feared waiting and getting less down the road.

    That is a big issue right now. Your property may be worth less than it was before the COVID pandemic. But it might be worth even less a year from now. There is no way to know. If you are planning to sell at some point in the future anyway, a sale and leaseback transaction could potentially save you from future losses.

    There are certainly other reasons for selling and leasing back. If you would like to discuss such a transaction to see if it might be right for your business, reach out to us. We are currently buying all sorts of commercial properties. We would appreciate the opportunity to explore sale and leaseback with you.