Special Report - The Benefits of Sale and Leaseback
A couple of years ago, Scotiabank completed the sale of their iconic office tower in downtown Toronto. The sale price was in the range of $1 billion. The strategy behind the successful transaction was simply that the sale added a billion dollars to their working capital reserves by taking advantage of selling at, what the bank perceived, is the top of the market for commercial property.
Where did they go? Absolutely nowhere…they simply sold the property to an investment group, and leased it back for fair market value.
This process is called a sale-leaseback transaction.
If it works for the Bank of Nova Scotia, it will surely work for your business too.
The sale and leaseback of all forms of commercial property is swiftly gaining popularity due to its tax advantages and market appeal. This type of transaction results when, for example, an established business sells its real estate to an arm’s length investor, then leases it back for a fixed period of time.
As the business and property owner, you may have the opportunity to release the equity contained in your real estate, freeing up cash for re-investment. You may choose to increase your business’s ability to expand, purchase new equipment, eliminate short term debt or just stabilize your business’s cash position. Inevitably, the business enjoys a higher return on the cash than appreciation of the building will provide…and this cash is your free equity, available only to you, not tied up in the real estate and not subject to bank limitations.
Ask your financial advisor how a successful sale and leaseback transaction would benefit your business. If you need to talk in confidence to an independent, professional tax or financial advisor on the subject and how it would benefit your company, we have a great one available and he will do the work for you and only you.
We can build a lot of flexibility into a sale and lease back program…you can even have the opportunity to re-purchase the property at some future point in time.
Is your business is a not-for-profit entity? It's possible your organization would not have to pay capital gains taxes on a sale and leaseback transaction.
From the investor/buyer’s perspective, they have the opportunity to acquire good real estate with the added bonus of a stable and responsible tenant…your business.
We recently completed a sale and leaseback transaction that generated over $5 million in cash for a business in York Region. It enabled this established family-owned company to eliminate all debt, expand their manufacturing capability and multiply their working capital. They didn’t have to move, their business carried on as usual and they have a lot less stress in their lives.
If you would like to learn more about sale and leaseback transactions, please send us an email or contact us.
Our email is secure, and our conversations will be held in strict confidence.
We'll send a comprehensive information package directly to you by return email. Based on your instructions, we will confidentially introduce your property to one or more of our private and institutional investors provided they have signed a confidentiality agreement to protect your privacy. We do not place your property for sale on MLS or our corporate web site, without your prior approval.
What do we bring to the table?
1. Some of the finest real estate minds in Canada, specializing in this type of transaction. We will negotiate your sale and the lease for a single fee.
2. Several quiet, but capable investors who are interested in expanding their holdings with good tenants leasing good properties.
3. A very astute appraiser who can provide a trusted valuation of your property quickly and economically.
4. Professional and confidential tax advice from an independent tax consultant.
5. Competitive fees based on success.
Thanks for your time and thoughtful consideration. Contact me to arrange a confidential pre-transaction consultation.
Peter M. Burdon