Another advantage to a sale or sale leaseback is for the retailer looking for an existing strategy in selling the business.
Complete a sale leaseback to an investor with the existing operation with assignment to a new buyer.
Set up a sale leaseback pre-negotiated for the buyer of the business.
When looking at outright sale or sale leaseback, investors want credit, lease term (at least 10 years, but prefer 15), market rents with escalations.
We know of two British companies that have completed sale leasebacks recently with subsidiaries in the United States and due to British Gap Accounting have recognized the gain in the year of the sale.
As a commercial real estate broker who specialized in sale leaseback transactions and the leasing of office facilities in Northern New Jersey in the late 1980's, I had the occasion to speak to many financial officers at the CEO, CFO, Treasurer and
Controller level inquiring to the potential of effectuating sale leaseback transactions on corporately owned property.
The sale leaseback is one vehicle that can enable credit-worthy companies to effectuate these changes.
Structured properly and in accordance with FASB guidelines, the sale leaseback is a means of off-balance sheet financing, which can allow the corporation to improve its return on assets, obtain long term low cost financing, enhance the balance sheet, avoid hostile takeovers, create profit, and raise cash.
The key elements involved in working with FASB guidelines for off balance sheet treatment are to make sure that the sale conforms to the test of being a normal sale leaseback which is defined as active use of the property in the trade or business of the seller lessee.