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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.

Runtime: 88 minutes
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Agenda

Sale-Leaseback Transactions

  • Rental Rate Determination
    • Seller Seeks to Sell Asset for Capital and to Continue Use Rights
    • Buyer Is Seeking Return and a Limited Risk of Tenant Default
    • Lease of Land or Land and Improvements; More Typically Land
    • Initial Rent Typically Established Based on a Rate of Return on the Purchase Price, and Tenant Credit Quality
  • Escalations Consistent With a Normal Lease Structure

Risk and Maintenance Allocation Issues

  • Risk for Condition of Land and Improvements Upon Sale and During Term
  • Buyer May View Seller as Fully Responsible for the Property
  • Seller May Want the Buyer to Assume the Risk for Pre-Existing Conditions
  • Buyer Wants Property Maintained to Preserve the Value
  • Seller May Be Inclined to Reduce Maintenance as End of Term Near

Expiration of Lease Term

  • Property's Residual Value
  • Value May Depend on "Aging" and Uniqueness of Improvements. (e.g. a Restaurant With a Particular Theme or Characteristic Structure May Have Less Value for a New User)
  • Removal Obligation
  • Evaluation of Hold Period and Asset Value at Lease Expiration

Special Circumstances

  • Buyer-Landlord as Seller; Arbitrage on Lease Rate Versus Sale Price
  • Sale and Shorter Leaseback as Planned Exit Strategy for User
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Why Lorman?

Over 32 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.

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Applications have not yet been submitted for Delaware, Idaho, Kentucky, Ohio, Oklahoma, South Carolina, and Wyoming CLE for this course. However, if you are interested in obtaining CLE for any of the listed states or have any additional credit questions please email us at [email protected] or call us at 866-352-9540.

This course was last revised on February 22, 2019.

Call 1-866-352-9540 for further credit information.

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  • This course was approved for a total of 1.25 hours of MCLE Credit by the Illinois MCLE Board.
     
  • ME CLE 1.0
     
  • This course has been approved by the State of Maine Board of Overseers of the Bar. Lawyers who complete this course shall receive 1.0 hours of CLE credit under M. Bar R. 12.
     
  • MS CLE 1.5
     
  • This program has been approved by the Mississippi Commission on Continuing Legal Education for a maximum of 1.5 credit hours.
     
  • MT CLE 1.5
     
  • This program has been approved by the Montana Commission of Continuing Legal Education for a total of 1.5 CLE credits.
     
  • ND CLE 1.5
     
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  • NY CLE 1.5 including Areas of Professional Practice 1.5
     
  • This course has been approved in accordance with the requirements of the New York Continuing Legal Education Board for up to a maximum of 1.5 credit hours in the area(s) of Areas of Professional Practice for 1.50 hours. Each hour may be counted only as satisfying one category of credit. Duplicate credit for the same hour of instruction is not permitted. This course qualifies for both established and newly admitted attorneys. Lorman Business Center, Inc. has a financial hardship guideline. Please contact customer service at 1.866.352.9539 for instructions on how to apply.
     
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  • RI CLE 1.5
     
  • This program has been approved by the Rhode Island Mandatory Continuing Legal Education Commission for 1.5 hours of CLE credit.
     
  • TN CLE 1.47
     
  • This program has been approved as a distance learning format by the Tennessee Commission on Continuing Legal Education for a maximum of 1.47 hours of credit.
     
  • VT CLE 1.5
     
  • This program has been approved by the Mandatory Continuing Legal Education Board of Vermont for 1.5 hours of self-study CLE credit.
     
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  • WI CLE 1.5
     
  • This program qualifies for 1.5 hour(s) of ondemand CLE through the WI Board of Bar Examiners.
     
  • WV MCLE 1.8
     
  • This program has been approved by the West Virginia State Bar MCLE Commission for 1.8 MCLE hours.
     
  • Enrolled Agents 1.0
     
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The CLE Code is ONLY a requirement when applying for CLE Credit in New York. Other states do not need to supply the CLE Code to apply for CLE credit.

To earn each credit Lorman offers through the OnDemand learning platform, you need to watch 100% of the program. Also, for certain credits you will need to fulfill additional requirements which will be displayed on the "credits" tab when viewing the course.

This program does NOT qualify, nor meet the National Standard for NASBA accreditation.

Audio & Reference Manual

  • Arizona CLE 1.5
     
  • CA MCLE 1.5
     
  • CT CLE 1.5
     
  • GA CLE 1.5
     
  • HI CLE 1.5
     
  • IL CLE 1.5
     
  • ME CLE 1.5
     
  • MT CLE 1.5
     
  • NJ CLE 1.8
     
  • NV CLE 1.5
     
  • NY CLE 1.5
     
  • VT CLE 1.5
     
  • WA CLE 1.5
     
  • WV MCLE 1.8
     
The CLE Code is ONLY a requirement when applying for CLE Credit in California (for participatory credit), Kansas, New Jersey or New York. Other states do not need to supply the CLE Code to apply for CLE credit.

This program does NOT qualify, nor meet the National Standard for NASBA accreditation.

MP3 Download

  • Arizona CLE 1.5
     
  • CA MCLE 1.5
     
  • CT CLE 1.5
     
  • HI CLE 1.5
     
  • IL CLE 1.5
     
  • ME CLE 1.5
     
  • MT CLE 1.5
     
  • NJ CLE 1.8
     
  • NV CLE 1.5
     
  • NY CLE 1.5
     
  • VT CLE 1.5
     
  • WA CLE 1.5
     
  • WV MCLE 1.8
     
The CLE Code is ONLY a requirement when applying for CLE Credit in California (for participatory credit), Kansas, New Jersey or New York. Other states do not need to supply the CLE Code to apply for CLE credit.

This program does NOT qualify, nor meet the National Standard for NASBA accreditation.

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Why Lorman?

Over 32 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.

Faculty

Kenneth S. Kramer

Kenneth S. Kramer

Nossaman LLP

  • Partner with Nossaman LLP
  • More than 35 years of experience as a real estate attorney
  • National practice involves advising developers and investors on a full spectrum of office, industrial, and retail property and portfolio transactions, including acquisitions and dispositions, leasing, financing, joint ventures, workouts and distressed transactions, and alternative energy transactions
  • Former chair of Nossaman’s Real Estate Transactions Practice Group, and is the firm’s current assistant managing partner
  • Lectured on a variety of real estate topics, including purchase and sale transactions and leasing
  • J.D. degree, University of Southern California School of Law; B.A. degree, University of Pennsylvania
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Product ID: 402975
Published 2019
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