Leaseback deal makes its mark in real estate

Leaseback deal makes its mark in real estate

Both investors and building owners are reaping the benefits. (grbj.com)

The sale-and-leaseback deal is becoming the new best thing in commercial real estate because market conditions and the lending situation are making these transactions good for the buyer and for the seller, both nationally and in West Michigan.

The Easy Leaseback division of Sperry Van Ness recently completed a sale-and-leaseback of a large manufacturing facility in the region. As usual, the transaction was done on a confidential basis. The listing drew seven offers from investor groups across the country and the deal closed in just 60 days.

The group took ownership of the facility and was able to put its investors in a situation where they’ll earn a decent return on their money. In turn, the manufacturer got the cash to invest in the business and a 20-year lease to continue operations at its current location.

“The deal is pre-set, so they are not buying speculative real estate that they have to lease out. So they know their income stream, they know their asset, and it’s pretty much a fixed, low-risk transaction,” said Peter Colvin, chairman of the Sperry Van Ness National Single Tenant Team, of the advantages of sale-and-leaseback to a buyer.

The buyer checks out the seller’s financial situation before making an offer, and if it’s determined the seller will be in business for the length of a proposed lease, then the deal goes forward. Once a deal closes, the buyer gets the steady income a lease offers and also captures the sought-after return.

“So they feel they’re going to get paid and they’re going to get paid the return they agreed to. They’ve raised money from investors or shareholders so they have to reinvest it because they promised their shareholders, say, a 7 percent return. While the money is being raised, it’s sitting in a bank account and making about 1 percent at most,” he said. “So they’re motivated. They have to buy and they’re looking for the safest investment deals they can get.”

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