A sale-leaseback lets a business owner sell the building the business occupies and sign a lease to stay. The owner receives the sale proceeds, which can pay off a mortgage or fund the business, and keeps operating at the same location. The key terms to negotiate are price, rent, lease length, renewal options and who pays for repairs.
Why would a business owner sell their own building?
To turn equity tied up in real estate into cash for the business, to pay off a mortgage that is coming due or in default, to resolve a partnership or estate, or to stop managing property and focus on the business. A sale-leaseback does that without moving.
How is the price set?
The buyer values the building based on the rent the business will pay and the strength of the lease, as well as the building itself. Higher rent and a longer lease usually support a higher price; lower rent supports a lower price. Owners can choose the balance that fits their business.
What should be in the lease?
Rent and how it increases, the lease term, renewal options, who handles roof, structure and building systems, any purchase option, and what happens if the business is sold. Have your attorney review the lease as carefully as the sale contract, because you will live with it for years.
Can a sale-leaseback stop a foreclosure?
If the sale closes before the foreclosure sale and pays the lender, yes. If the price is below what is owed, the lender must agree. Starting early gives you the best chance.
What are the downsides?
You give up ownership and future appreciation, and you take on rent. It is not right for every business. Compare it with refinancing or selling outright, and talk with your accountant about tax effects.
Does Belcz Group do sale-leasebacks?
Yes. We buy owner-occupied commercial buildings from $250,000 to $3,000,000 in NY, NJ and CT and lease them back on agreed terms. We send a written offer within 2 business days.