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by Mike Myatt
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orporate real estate transactions are not bound by formalized loan industry or REIT requirements, giving lenders flexibility to meet the operating needs of your business. Rents can be fixed for the full lease term without inflation adjustments or any percentage rent. Rents can also be stepped to be lower in the early years or reset periodically to take advantage of improved credit, interest rates and other conditions. We can also address unexpected financial and business contingencies.
Operational Control: Most lenders offer programs that will allow you to retain complete operational control of the property for as long as it is required in your business.
Low After-Tax Cost: The lease payment under a sale leaseback structure is fully deductible over the lease term, making the after-tax cost to your company less than with alternative forms of asset-based financing and less than the market rent you would typically pay. For federal income tax purposes, a company can only depreciate buildings and other physical improvements, but not land. Most sale leaseback solutions factor the value of the land into the rent. The rent is fully deductible, effectively enabling you to depreciate the cost of the land.
Credit Tenant Property Can Provide Similar Financial Benefits To the Issuance of Corporate Bonds: If a business is deemed to be a credit tenant or its financial equivalent its corporate real estate assets can be effectively be used to secure management-free cash flow with exceptional liquidity and high leveragability performing like corporate bonds while preserving the benefits that real property offers. Because of the secure character of credit tenant property investments, properties can be leveraged far more highly than traditional real estate. Based on the lease guarantee by the tenant, non-recourse financing may be arranged with a 1.0 debt coverage ratio, llowing for financing Up to 100% loan to value. Income from an investment grade tenant over the length of a multi-year lease offers reliable returns comparable to those of corporate bonds. Credit tenant leases are usually written for terms ranging from 10 to 25 years. Lengthy terms eliminate concern about tenantturnover normally associated with real estate ownership.
Near-Zero Volatility: M |
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