Structuring Real Estate Sale-Leasebacks: An Alternative to Mortgage Financing for Owner-Operators and Investors

This CLE course will provide real estate and finance counsel with the tools to structure sale-leaseback transactions. The speaker will also discuss the advantages and pitfalls of these deals for seller/tenants and buyer/investors and offer best practices to structure the deal for all parties to protect their interests.

Sale-leaseback transactions provide the seller/lessee access to capital tied up in real estate assets without the underwriting and legal constraints of mortgage financing. Leases can be structured with longer-term, fixed payments and effectively higher leverage than conventional loans, allowing for potential tax benefits not available with mortgage loans.

For the investor/lessor, the sale-leaseback provides the opportunity to acquire commercial real estate that comes with a long-term, credit-worthy tenant under a triple net lease. The credit quality of the tenant and the condition of the property are primary concerns for the investor.

One disadvantage for the seller is the loss of flexibility as owner-occupant. Lease negotiations over potential limitations for the seller can be contentious. Some tenant-friendly lease provisions will need to be subordinated to a future mortgage or ground lease, making SNDA requirements critical to the negotiation. The seller/lessee must also be mindful of the accounting treatment of the lease under current accounting standards.

Listen as our speaker discusses sale-leaseback market trends, advantages and pitfalls for sellers and investors, deal structures and terms, and best practices for the parties to protect their interests.