In Focus: Sale-Leasebacks Help Companies Leverage Capital
8 Oct 2020
As the U.S. economy begins to dig itself out of a deep hole caused by the COVID-19 crisis, many businesses now face the stark reality of a substantially reduced pool of working capital along with credit lines that will likely not thaw out anytime soon. Yet despite those challenges, retailers, logistics firms, and other industrial real estate users are now finding new opportunities in the sale-leaseback arena that are enabling companies to quickly unlock capital and increase cash flow.
Now more than ever, businesses are making decisions to diversify their existing capital sources in order to beef up their reserves for immediate needs such as payroll, operations, and other core business activities. Private equity groups have recently seen a substantial uptick in sale-leaseback inquiries from both new and existing clients, with the majority of deals structured within a triple net lease model that allows sellers to retain possession of facilities vital to operations under a long-term lease. The sale-leaseback is not a new concept to the market nor is it only beneficial in times of economic duress. However, decision-makers should know that rent terms for prospective sellers have probably never been in a more favorable position thanks to record-low interest rates.