SALE-AND-LEASEBACK
Sale-and-leaseback: release cash from your company's property and keep using it
In a sale-and-leaseback, a company sells a property it uses to an investor and keeps occupying it under a long-term lease. The company turns a fixed asset into cash and carries on operating as before.
At Manifest we structure the deal and present it to investors who buy this type of asset.
If any term is unfamiliar, it is explained in our financing glossary.
PROCESS
How it works
- Sale of the property. The company sells the industrial building, office or retail unit to an investor, who becomes the owner.
- Lease. At the same time, the company signs a long-term lease with the new owner.
- Business as usual. The company stays in the same property, with the sale proceeds available for its business.
The lease can include a buy-back option or a right of first refusal, if negotiated from the start.
ASSETS
Which assets fit
We work with properties used by businesses and, on the same logic, with machinery and plant:
Logistics and industrial buildings
The asset most sought after by investors in this type of deal.
Offices and retail units
Headquarters and premises with an established business.
Hotels
The owner sells the property and keeps running it, or an operator comes in.
Care homes and healthcare assets
Properties with stable operations and long-term contracts.
Agribusiness assets
Processing facilities, warehouses and production sites.
Rent back of machinery and plant
The company sells its production equipment and keeps using it under a lease.
WHEN
When it makes sense
- The company needs capital to grow, invest or carry out a strategic plan.
- It is going through a turnaround and needs to free up resources.
- It wants to reduce bank debt or reshape its balance sheet.
- It has a lot of value tied up in property and little cash available.
- The bank will not lend any more against those same properties.
BALANCE
Advantages and what to weigh up
| Advantages | What to weigh up |
|---|---|
| Cash without bank debt | The company stops being the owner and gives up any future increase in the property’s value |
| Operations continue without interruption | It takes on a long-term lease commitment |
| Rent is a business expense | The sale may generate a capital gain with tax consequences |
| Flexible lease terms: term, buy-back, maintenance | The accounting and tax treatment depends on the structure: it must be reviewed with the company’s adviser |
It is not always the best option. We compare it with the alternatives, such as a loan secured on the same property, before recommending it.
CRITERIA
What the investor looks at
- The property: location, condition and how easily it could be let to another tenant if needed.
- The tenant: the creditworthiness of the company that stays in the property. This carries the most weight.
- The lease: term, lock-in period, rent indexation and guarantees.
- The rent: sustainable for the company and in line with the market.
- The yield: the ratio between purchase price and rent, which determines the investor’s interest.
Price and rent are linked. A higher rent supports a higher sale price, but commits the company further. Finding the balance is part of our job.
METHOD
How we work
- First conversation, free of charge. We look at the property, the company and what the cash is needed for.
- Valuation and sustainable rent. We estimate the price range and the rent the company can comfortably carry.
- Information pack. We prepare the property and company information the way an investor asks for it.
- Presentation to selected investors. Family offices, funds and specialist investors, in full confidence.
- Negotiation and closing. Price, lease and buy-back options, through to signing.
Fees: we work mainly on a success basis. Terms are agreed in writing before we start.
QUESTIONS
Frequently asked questions
Can I get the property back in the future?
Yes, if agreed. The lease can include a buy-back option or a right of first refusal. It is best negotiated from the start.
How long is the lease?
These are usually long leases, with a minimum lock-in period. The exact term is negotiated on each deal.
What about the capital gain on the sale?
If the sale price exceeds the book value of the property, a taxable gain arises. We recommend reviewing the tax effect with the company’s adviser before closing.
Is it better than a mortgage loan?
It depends. The loan keeps ownership but adds debt; the sale-and-leaseback releases more cash without bank debt, but the company stops being the owner. We compare them case by case.
Can it be done with machinery?
Yes. It is called rent back: the company sells machinery or plant and keeps using it under a lease.
Is the deal confidential?
Yes. We only present the deal to selected investors and do not disclose the company’s details without its consent.
Does your company own property and need cash?
Tell us what the property is, where it is and what you need the cash for. We will tell you whether a sale-and-leaseback fits or whether there is a better alternative. You can also call us on +34 678 131 989.
The information on this page is general and does not constitute tax or accounting advice. Each deal is analysed individually.