Building liquidity through
sale & lease back
Selling and leasing back self-occupied company-owned real estate, simultaneously, unlocks capital and creates equity available for investments and growth
Most important reasons for a sale & lease back transaction
Especially in times of high real estate valuations the market value of a property is often above its book value. Hidden reserves can be transformed into balance sheet equity.
Unlock liquidity for investment in operations or corporate growth.
Adjust the capital structure
Possibility to optimise the capital structure such as debt amortisation or return of capital to shareholders by means of distributing a dividend.
Improved operational flexibility
Possibility to evaluate stay or go at the end of the lease term. A sale and lease back transaction can be a long-term exit strategy in a win-win-situation with the investor.
Sale and lease back – liquidity when you need it
Raising capital from your company’s property by selling and leasing back individual assets or whole portfolios can be highly beneficial. Monetising your real estate can help:
1. Release of tied up financial resources and realization of hidden reserves.
2. Creation of liquidity and better liquidity ratios.
3. Unlock capital for business operations such as investments or growth.
4. Momentum strategy with currently high property valuations.
5. Early exit scenario before a property becomes a problem in the event of a separation from properties that will be redundant in the future.
We have a wide expert knowledge in structuring, executing and negotiating sale and lease back transactions. We follow a holistic commercial approach by connecting your operational and financial targets.
Sale & Lease Back – Why and how ?
Selling a property and simultaneously leasing it back – a conversation with Lars Frölich
Everything you need to know about financial and operationsal benefits from a sale and lease back transaction, how the rent is defined and resulting rights and obligations.
Our track record
108 successful transactions in Switzerland with a total of >225 properties
Thereof, 29 are executed sale and lease back transactions in Switzerland with >50 properties in sum
CHF 11.5 billion
The grand total of all Swiss transactions is > CHF 11.5 billion.
Thereof, > CHF 4.6 billion are executed sale & lease back transactions
We have been the first ones to institutionalise the reverse auction to optimise the ratio of rent and purchase price
Leading digital tools to execute a transaction most convenient for investors as online as possible and to maximise multimedia use for more emotions
Global and local
JLL Switzerland combines the advantages of a customer-oriented national organization with the strength and professionalism of a global company
Selling and leasing back a property creates several conflicts. An overview of the most important tensions in which JLL comprehensively advises you:
Maximizing the transaction’s gain vs. lower rent and higher profitability in the future
The classic one among the conflicts, commonly known as the management generation conflict. It’s the question about today’s transaction gain or tomorrow’s corporate gain.
Capital market’s view:
On the one hand market and contractual rents are compared. On the other hand affordability and default risk of the tenant are analysed. A possible auction process variation is a tactical combination of maximizing the sales price and simultaneously minimizing the rent.
Operating flexibility by means of a short lease back term vs. maximising the sales price through a long-term lease back
From an operating flexibility point of view, the lease back term should be kept as short as possible with the most possible number of short-term extension options. In order to maximize the property’s sales price the lease back term should be as long as possible to create long-term income stability.
Capital market’s view:
The property’s characteristics for alternative uses, such as location, usage and flexibility are decisive for the expected income stability and tenant dependency.
Full operational control and flexibility vs. low maintenance obligations
Interfaces and the list of responsibilities according to the lease agreement define control and flexibility. A typical base rule is “operations first” meaning that the lease agreement should provide the highest possible flexibility within the property to the tenant. However, this comes along with seller-tenant’s obligations to maintain the property, too.
Capital market’s view:
Typically, there is information asymmetry about the property’s building conditions. Allocating future maintenance obligations at the seller-tenant can prevail unnecessary risk premia by the buyer. Such structuring also makes a real estate investment passive, which is often a investment characteristic strived for.
Good to know
Selling and leasing back a property with reduced alternative uses is rather corporate financing. Thus, real estate investors treat the transaction as such and the seller-tenant is analysed accordingly.
Criteria to determine the alternative use are location and degree of specification for the user and usage.
The higher the degree of specification of a property the lower the alternative use possibilities, the longer is the required minimum lease term.