Benefits of a Sale-Leaseback

  • Unlock 100% of Your Equity: A sale-leaseback allows you to obtain 100% financing and unlock the full value of your real estate. On the other hand, if you refinance with a lender the maximum loan amount you would be able to secure in the current market would be around 55% loan to value (LTV).

  • Pay Off Mortgage Debt: Selling allows you to eliminate your debt obligations and grow your business under a more flexible lease arrangement.

  • Obtain the Highest Sales Price: If you need to move your medical business in the future, you won't be forced to sell a vacant building, which always results in a much lower sales price. On the other hand, selling a building that is occupied and leased for 10, 15, or 20-years has considerable value since it provides stability and certainty to potential investors.

  • No Recurring Loan Costs: Commercial loans typically have balloon periods of 5, 7, or 10 years. And every time you refinance, you'll incur refinancing costs.

  • Higher Returns on Your Money: You'll obtain a much higher return on your investment by investing in your medical business than the real estate upon which it sits.

  • No Restrictive Loan Covenants: Commercial lenders often insert restrictive loan covenants into promissory notes that can interfere with how you can operate your business.

  • Sell Your Real Estate and Your Business Separately: If you want to sell your medical property one day, you'll obtain a higher price by selling the business and the real estate separately.

  • Deductible Expenses: When your medical property leases real estate, it can deduct the entire lease payment as an operating expense on its tax return. However, when your medical property owns real estate, it can only deduct the interest portion of the mortgage payment along with any allowable depreciation (typically depreciated over a 39-year period).

  • Finance Growth & Investment: You can use your sale proceeds to build or acquire additional locations, invest in new equipment or technology, and reallocate capital.

  • Structure a Lease that Fits Your Needs: The landlord and tenant can negotiate a mutually beneficial, long-term, net lease.

  • Facilitate Partner Buyouts or Ownership Restructuring: Use your sale proceeds to buy out partners or buy back stock from other shareholders.

  • Avoid the Risks of Owning Real Estate: Improve the risk profile of your medical business by eliminating real estate as a source of potential liability.

  • Improve Overall Finances: You can use your sale proceeds to procure working capital, pay down debt, improve financial statements, improve financial ratios, and gain tax advantages.

Considering a Sale-Leaseback for Your Medical Property?

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