Increase Shareholder Value

• Immediately create shareholder value by selling real estate at a high multiple of cash flow. If a company enters into a sale-leaseback transaction at 9% cap rate, that is equivalent to selling part of the company at 11x cash flow. In this case, if the overall company is valued at less than 11x EBITDA, the sale-leaseback transaction is immediately accretive to the equity holders.

• Increase long-term profitability by more efficient capital utilization. Companies usually have internal hurdle rates of 15%-30% that must be met to justify an investment. By owning real estate, companies are accepting a rate of return (7%-12%) on those assets that is far lower than their internal standards.

Improve Liquidity

• Realize 100% of the value of real estate assets. Pledging assets for a bank loan might yield proceeds of 60%-75% of the building’s value. Selling a property through a sale-leaseback transaction will generate proceeds of 100% of a building’s fair market value as determined by an independent appraiser.

• Improve balance sheet ratios. Leases are structured as operating leases (not capital leases), thus allowing the asset to be transferred off the balance sheet. Cash proceeds can be used to pay down existing debt, which would improve a company’s balance sheet and leverage ratios.

Reduce Risk from Leverage

• Secure permanent, fixed-rate financing. Unlike traditional bank debt or corporate bonds, sale-leasebacks never need to be refinanced. With renewal options available after the initial lease term, fixed lease rates can be secured for up to 40 years or more.

• No covenants or changes. Sale-leasebacks usually contain no financial covenants and are not subject to changes or cancellation over time due to fluctuations or disruptions in the capital markets.