You sell the building and stay in it on a long lease. Here is what that actually changes about your business, and what it does not.
A sale-leaseback is one transaction doing two jobs. You sell the property your business owns and occupies, and you sign a lease on the same building at the same time. You keep operating where you are. Nothing about the work your business does has to change.
What changes on day one
Title moves to the buyer, and you become the tenant. The lease is long, commonly 15 years or more with renewal options, so your right to stay is written down rather than left to a landlord's discretion. Under a triple net structure you continue to carry taxes, insurance, and maintenance, much as you did as the owner. There is no move, no downtime, and no change your customers can see.
What it frees up
The equity in the building converts to cash on your balance sheet. Because the sale is priced off the property rather than borrowed against it, a sale-leaseback can return up to 100% of the property's value, where a mortgage typically advances 60 to 70% loan to value. Pricing generally lands around an 8% cap rate, roughly 12.5x the annual rent, so the rent you agree to is what sets the proceeds.
What to weigh before you start
You are trading an asset you own for a fixed obligation you have to pay, in good years and bad, so the rent has to be one the business can carry through a slow stretch. You also give up future appreciation on the building. And a sale can trigger a taxable gain depending on your basis and structure, which is a conversation to have with your own tax advisor early rather than at closing.
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