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Structuring Sale-Leaseback Transactions


Explore the structure of sale-leasebacks and the more creative versions of such transactions.

Operators not wanting to retain capital in real property may look to sell the asset and lease it back from the purchaser at the closing in a so-called sale-leaseback transaction. Retail users, such as banks and restaurants, frequently utilize such transactions. We have also seen sale-leasebacks work for larger users planning a move from the property being sold, while retaining the flexibility to have time to do so and generating capital from the first property to move forward with the next property. These transactions include a set of issues that can be viewed as an overlay on the normal approach to each of a purchase and sale and a lease. Factors include (a) the economics of the transaction as, essentially, an investment transaction, (b) the allocation of risk between the operator-seller which developed the facility, and the purchaser-landlord which will own the property, and (c) the approach to the property upon expiration of the leaseback. Financial creativity has expanded the use of the sale-leaseback structure. There are firms which acquire land to lease to an operator, and sell the lease following completion and opening of the operator's facility. In other cases, a ground lessee, after developing its facility, may sell the ground leasehold interest with or without the improvements made, and lease back the improved property from the purchaser, creating a so-called sandwich position for the investor, with its own set of issues and opportunities.
We will explore the overall structure of sale-leasebacks and the considerations for each side to evaluate and address in a particular transaction, as well as looking at some of the elements that may affect the more creative versions of such transactions.



Kenneth S. Kramer

Kenneth S. Kramer

Nossaman LLP

  • More than 40 years of experience as a real estate attorney
  • Advises major regional developers and investors with diversified portfolios on a full spectrum of office, industrial, recreational, and retail property transactions, including acquisitions and dispositions, leasing, financing, joint ventures, workouts, and alternative energy transactions
  • Leasing experience includes numerous build-to-suit leases, including approximately 150,000 square foot tenant with expansion rights, distribution, and office facility; 400,000 square foot warehouse and distribution facility; lease renewing, expanding, and renovating office campus and addition of a build-to-suite R&D building to the campus; multi-site express car wash ground leases; QOZ lease structure for conversion of office to residential; recent campus sale and partial leaseback as exit strategy
  • Lectures on leasing transactions, build-to-suit leases, and other real estate topics
  • Former chair of Nossaman’s Real Estate Transactions Practice Group, and current assistant managing partner of Nossaman
  • J.D. degree, University of Southern California School of Law; B.A. degree, University of Pennsylvania

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