Iscanco has been a leader in the field of Sale and Leasebacks and capitalized on tight credit markets and completed transactions with a number of companies. Subsequent sales and refinancings have generated substantial gains for its investors.
In light of the on-going credit crunch, the sale and lease back transaction is becoming a very attractive vehicle, both for owners who wish to monetize their real estate and provide their company with an immediate cash infusion as well as investors seeking long-term, stable returns on their investments. We have completed a number of Sale and Leaseback for office, distribution centres and manufacturing plants. The Sale and Leaseback lease for all intense and purpose is a transparent one in the sense that the tenant would continue to operate and manage the property as if it were still the owner. We are not normally involved in the day to day management of the property. The Tenant continues to effectively control the property after the sale.
Some of the Advantages of a Sale and Leaseback for a company:
- Provides immediate cash infusion for core business activity, expansion and other purposes, rather than having company funds tied up in a non-liquid and non-performing asset carried at below-market value.
- Helps reveal the real value of the company.
- Improves financial ratios, decrease debt to equity ratios, and thereby eliminate restrictive debt covenants.
- Decreases interest and depreciation expense.
- Improves balance sheet and debt equity ratios.
- Seller remains in day-to-day operational control of the property.
- Lease normally represents 100% financing of the value of the property,whereas mortgage financing for the seller would be considerably less.
- Full deductibility of the lease rent, whereas ownership of the real estate permits depreciation of the building but not the land.
If the real estate has been fully depreciated, the rent deduction is even more beneficial to the corporation.
Sale and Leaseback is as much about financial engineering as about real estate.
Sale and Leasebacks may involve a long-term lease with:
- Rights of expansion of the existing building in accordance with the tenants requirements that are financed by the purchaser with an agreed upon rental formula.
- Construction of a new facility in accordance with tenant requirements.