Compare the complete economics
Review the sale proceeds after existing debt, transaction costs and taxes with your advisers. Then compare rent, increases, maintenance, capital spending and renewal terms with the costs of keeping and financing the property.
Separate the property decision from the business
The company can continue operating after a sale-leaseback, but it becomes a tenant. Consider how long the property is needed, whether the business may expand or relocate and what flexibility the lease permits.
Evaluate the lease and guarantees
Review the proposed tenant, any guarantees, assignment rights, casualty provisions, repair obligations and default remedies with counsel. The lease allocation of responsibilities matters as much as the headline purchase price.
The Masterson affiliate’s role
Real Estate Capital Partnerships evaluates operating real estate for purchase through a principal-side affiliate working with institutional capital partners. The affiliate is a prospective buyer and landlord. It does not represent the seller in a marketed sale process.
What to send
Provide property addresses, size and use, recent company financials, existing property debt and the intended use of proceeds. Those materials support an initial evaluation of the property and lease economics.
Calculate the cash the business can actually use
Begin with the proposed sale price and deduct existing property debt, transaction expenses and the tax amounts estimated by your advisers. Compare the remaining cash with the business purpose: an acquisition, expansion, debt repayment or an ownership transition. Gross sale proceeds can overstate what is available for that purpose.
Then model the lease as an ongoing operating commitment. Include rent increases and the property expenses allocated to the tenant. Compare this with keeping the property, including debt service, capital spending and the value of retaining ownership.
Discuss future operating changes before signing
A facility that works today may need additional loading, power, storage or production space later. Identify expected improvements and discuss who can approve, fund and own them under the proposed lease. The answer can affect both the initial transaction and the business’s next expansion.
Also consider a future business sale, a change in control or a partial relocation. Lease assignment and other consent requirements should be reviewed with counsel while the transaction is being structured. The principal-side affiliate evaluates these issues as the prospective buyer and landlord.
Discuss your property financing or explore sponsor consulting.