More and more companies are looking for ways to expand their business. As a result, we’ve started to see an increase in Commercial Leaseback transactions. In this type of a transaction, a company sells the real estate it currently occupies and then leases the space from the new owner. The new lease will usually be long-term. This type of transaction can be very beneficial for both buyer and seller. The selling company is able to free up the capital it has in the property, while the buyer is able to instantly gain a long term tenant in its new real estate acquisition. In a market where we are seeing record commercial vacancies in some regions, having a long term tenant from the get-go provides the new buyer with a secure investment.Although we have seen an increase in these types of transactions, the industry is still seeing very slow momentum due to a lack of financing for commercial properties. The majority of would-be buyers are still being forced to sit on the sidelines watching the cash investors scoop up all the best deals. For the investors who do have access to cash: due to the lack of competition, an investor in todays market is typically able to pick from the cream of the crop and in many cases can find themselves in a long term leaseback transaction which will be brining a positive annual cash flow of 7% or grater (8% or more in retail leaseback transactions).
The type of return a buyer can expect through a leaseback is typically based on the strength of the company that is selling. Like any transaction, it is the buyer’s responsibility (or their agent/broker) to do their due diligence to discover any adverse conditions associated with the property. However in the event of a leaseback, this due diligence should also include an evaluation of the company that is selling. The purpose of this evaluation will be to determine the company’s overall strength and whether or not it is positioned to ride out the rest of this recession. If the company shows signs of weakness, then it has a higher risk of defaulting on the lease agreement. This higher risk should translate into a higher rental rate.
Should you have any questions or need further information,
please don’t hesitate to contact me, (775) 220-1630
Or visit my website: www.SellingHomesinReno.com
NAR designated: Short Sale & Foreclosure Resource
Office: 775 850 5900
Toll Free: 877 922 5900
Cell: 775 220 1630
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985 Damonte Ranch Pkwy, Ste. 110
Reno, Nevada (NV) 89521