Sale-leaseback

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Related to Sale and Leasebacks: Sale and Leaseback Agreement

Sale-Leaseback

The sale of a property in which the seller immediately begins to rent the property from the buyer. That is, the seller no longer has ownership of the property, but maintains residence and/or use for the duration of the rental agreement. A sale-leaseback gives the seller profit from the sale while the buyer is guaranteed income from the rental agreement in the medium or long-term. Sometimes, a sale-leaseback occurs in order to grant the seller access to capital to make improvement on the property; for example, the seller may use the proceeds from the sale to build a factory. A form of sale-leaseback, known as sukuk al-ijara, is a common structure for sukuk, or the equivalent of a bond, in Islamic finance. Sale-leaseback is also called simply leaseback.

Sale-leaseback.

In a sale-leaseback arrangement -- also known as a leaseback -- an owner sells his or her property, and then immediately leases it back from the buyer as part of the same transaction.

This way, the seller gets the profits from the sale while keeping possession and use of the property, while the buyer is assured immediate long-term income on the property.

Sale-leaseback transactions are most commonly used in commercial real estate, but can also apply to commercial vehicles and other types of property.

References in periodicals archive ?
Banks will lend around 70% of the vacant possession value whilst a sale and leaseback structure can realise 100% of the investment value, hence releasing what could be double the amount of cash into the business.
The investment market is becoming more sophisticated, and structured sale and leaseback opportunities are becoming more popular with both businesses looking to release poor performing capital for reinvestment, and investors with an appetite for investment opportunities.
DTZ was recently involved in the sale and leaseback of a 570,000sqft distribution warehouse on behalf of Somerfield plc.
This has in part fuelled the demand for sale and leasebacks and there is no doubt that if you're an occupier considering a sale and leaseback, now is a good time to do it.
L'Oreal recently funded the extension of its production facility in Llantrisant on a sale and leaseback. Biotrace is currently marketing its research and development facility on Bridgend Science Park on a sale and leaseback basis.
One of the most interesting developments in the sale and leaseback market is securitisation.
The sale and leaseback has long been used by companies to extract money from their property in order to invest in their core business.
Therefore, while the proposed IAS17 will decrease the incidence of its use, the sale and leaseback remains an important option for the corporate owner-occupier, especially in a climate where the availability of credit from lenders remains constrained more than two years after the banking crises.
Similarly, investors are seeking to plough unprecedented levels of equity and debt into the region's property market and the growth of structured sale and leasebacks will be a major source of product for the market.
There is strong investor demand for traditional sale and leaseback opportunities in the North-East and, for the business selling the property, this option can provide maximum capital receipts quickly and easily.
However, the market is becoming more sophisticated and structured sale and leaseback opportunities are becoming more popular with both businesses looking to release poor performing capital for reinvestment and investors with an appetite for active management opportunities.