However, if the standard comes into force, tenants have to place the obligation to pay rent over the entire-lease term on their balance sheets as a liability, which would "kill the whole sale and leaseback thing for companies like Tesco because it brings all of the debt back on to the balance sheet", explains a property insider.
Even if the likes of Tesco do find a way around the new accounting rules, some property pundits think that the appetite for supermarket sale and leaseback deals will eventually runout of steam.
And if changes to the accounting rules do come in, the latest wave of sale and leaseback activity could be rather shorter than hoped.
TESCO Intends to generate [pounds sterling] lbn annually trom sale and leaseback deals, creating profits of [pounds sterling] 250m [pounds sterling] 350m per year.
The total rent is based on an average of 31 percent of the relevant total turnover for the 9 properties subject to the Sale and Leaseback, subject to a minimum guaranteed rental cost of 9.
Completion of the Sale and Leaseback is conditional only on the approval of the shareholders being obtained at the EGM.
shareholders have a choice whether or not to participate in the return of capital - it is a tax efficient use of the proceeds of the Sale and Leaseback - it is expected to enhance the Company's earnings per share * from the year ending 31 March, 2004, the first full year following the Tender Offer which will benefit from its financial effects - it is expected immediately to increase the Company's net asset value per share*.
The Company has executed definitive agreements for the sale and leaseback of two communities in addition to those described above.
In addition, the Company is in advanced discussions (and in certain instances has entered into non-binding letters of intent) with several different parties relating to the refinancing and/or the sale and leaseback of up to ten additional communities.
This press release and statements made by or on behalf of the Company relating hereto, including all statements concerning the Company's recapitalization efforts, proposed equity financings, proposed sale and leaseback transactions, potential payments pursuant to earn-out arrangements, and results of operations for future periods, may be deemed to constitute forward-looking information made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Gilson, Chairman and CEO, commented, "We have been working with a major financial institution for several months now to develop a sale and leaseback program that made aircraft ownership more affordable and hassle-free.
The sale and leaseback program we have developed is advantageous to both parties.