19 June 2020
Sale and Leaseback:
Providing a welcome solution to owner occupier liquidity issues in 2020
For commercial property owners looking for increased cash flow without day-to-day business interruption, sale and leaseback transactions can offer a welcome solution.
The specialist commercial property team at Spector Constant & Williams have a wealth of experience in dealing with such transactions.
A sale and leaseback transaction is, most commonly, the sale of a freehold interest to an (often institutional) buyer with a lease of the same premises granted back to the seller immediately on completion of the sale.
Capital tied up in freehold property is released to the seller tenant allowing cash flow and, often, opportunity to upscale operations / invest in a business. In the current climate such cash flow, may, of course come in useful for other objectives – many occupier businesses, especially (perhaps) retail will require use of reserves, and increased liquidity, to continue to trade, to weather the storm or to de-gear in terms of finance.
A sale and leaseback transaction could provide up to 100% of a property’s appraised value and as the seller / tenant entity is currently in occupation, sale and leaseback transactions can often be undertaken fairly quickly in terms of legal process once terms are agreed. In addition, there may be SDLT relief applicable to the grant of the Lease.
Careful consideration will need to be given to the key terms of any sale and leaseback deal making sure the right price is agreed for sale and rent under the leaseback (including consideration of rent review terms), length of leaseback term (offering security to the tenant) and covenant strength of tenant (offering security to the Landlord).