As we emerge from lockdown and businesses consider the options open to them to raise cash at a time when an injection of cash is badly needed for businesses to continue to operate, a sale and leaseback could be a solution for a business that owns its own premises. A sale and leaseback is a way to raise cash as an alternative to going down the route of raising funds through bank borrowing or other types of finance.
One major advantage is that the business can continue to operate from its existing premises providing continuity for customers, suppliers and staff.
Sale and leaseback transactions are a particularly useful means of raising cash for businesses in the retail and logistic sectors. These sectors are those which, post lockdown, cash will most likely be required for negative or positive reasons.
The most typical type of sale and leaseback is where the Seller sells the freehold of its operational premises and takes back an open market rental lease for a term of between 10 and 20 years subject to rent reviews either on an open market or an index linked basis. These purchasing opportunities are attractive to cash rich investors since they carry the advantage of having an income stream from the rent payable.
So far as the Seller is concerned, while it might be a wrench to part with freehold ownership of an operating site this could be mitigated by including a right to buy back the freehold in the future or by including a right of first refusal in the event that the Buyer wishes to sell on at some time in the future.
Sale and leaseback arrangements will need careful consideration with the operating company’s accountants to determine the full effect on the company’s balance sheet. The precise terms of the deal will need to be thought through carefully and captured in the transfer and leaseback documents.
If you are an owner-occupier who would like to discuss your options or if you are an investor looking at opportunities please contact us for a preliminary discussion. In the first instance please contact Elizabeth Deyong on e.deyong@barrellison.co.uk.
Turnover rent – trends and head scratcher moments!
There has been a marked increase in turnover provisions creeping into commercial leases, ranging from the fairly standard turnover percentage payment on top of a base rent to a much more complex beast that can [...]
Turnover rents – it’s time to break a leg!
The mantra underpinning the landlord and tenant relationship since the pandemic has been collaboration and flexibility – this just so happens to be two of the core characteristics of a turnover rent
Recovery of Possession from Residential Tenants
Recovery of Possession: the government is keen to afford residential tenants greater security and the increasing obstacles to service of a Section 21 Notice appear directed at this.
Unlocking Value: Sales and Leasebacks
Advice on the legal structure of sale and leaseback transactions which would allow businesses to remain in occupation of their current operating sites while raising much needed cash in the short term.
Commercial Leases: Gearing up as we Emerge from the Pandemic
If you are considering lease variations, get in touch to talk through how these can best done most effectively.
Buying or Selling Land? Instruct Your Solicitor Carefully
This case demonstrates the impact of technology on practices that have developed prior to that technology.
Fixtures and Chattels: Be Clear or Be Aware
The case provides a lesson to all involved in the sale/purchase of a property. Make it clear, from the outset, both in negotiations and in the contract, what is included in the sale and [...]
Brexit not frustrating leases … yet
The High Court has granted the European Medicines Agency the right to appeal its decision that its Canary Wharf lease has not been frustrated by Brexit.
Sober Reading for Landowner Victims of Waste Dumping
The background to this case provides sober reading for any landowners of vacant sites. In this instance, around 2000 tonnes of waste including food and medical waste was deposited on Newark’s vacant land without [...]
Mortgage Default: Who May Buy the Property?
Anybody entrusted with selling property on the behalf of a lender can take comfort in the robust approach shown by the Court.