During difficult economic times, companies in America prefer to find ways of selling the commercial properties that they own but cannot use effectively to generate revenue for their operations. The objective of top management such business establishments are to ensure that they get enough money from the sale consideration of such real estate to focus on their core business activities. At the same time, these corporate enterprises also do not want to become liable to pay huge capital gain taxes in the course of disposing of such land and buildings. One effective strategy that these businesses can adopt is to enter into sales-leaseback transaction with the original owner or investor of such properties.
Talk to the experts
The Welfont Group is a popular boutique commercial brokerage corporate enterprise in the United States that represents the interests of property investors and tax-exempt charitable organizations. The top management of this company focuses its attention on helping their clients search for, analyze, evaluate, finance, buy, administer and sell properties that they can use for commercial purposes. The personnel of this business establishment also go out of their way to assist such customers in taking advantages of various tax-strategies that the Internal Revenue Service recognize and approve. Such schemes include 1031 Exchange and the IRS Section 170 Bargain Sale that make it possible for such clients to reach their full potential.
Why do companies opt for a sale-leaseback transaction?
The experts of this commercial real estate brokerage company explain that in the times of financial hardship, companies concentrate on expanding their core business operations in the market. This leaves the management of such businesses with little time on their hands to manage commercial properties that they cannot use effectively to generate adequate cash flow revenue. However, such corporate enterprises need to such real estate to produce the goods and services that they sell to their clients in the market. This is the reason why such establishments enter into sale-leaseback agreement with the original owners or an investor of such land and buildings.
These real estate professionals go on to explain that under a sale-leaseback contract, the company can save money because it does not need to invest in the maintenance of such properties. On other, the corporate enterprise pay a nominal rent to the original owner or investor of such real estate for leasing out such land and building to the establishment on specific terms and conditions . The main advantages of sale-leaseback agreement to both parties are:
- Cash infusion to the company
The company gets the cash it needs from the sale consideration of the commercial property to expand its core business operation in the market.
- Tax saving
The company can claim the lease payment to the original owner of the commercial property as a business expense for tax purposes.
- Maintain control of the property
In such agreements, the original owner of the commercial property or the investor may allow the company as tenant to retain control over the real estate on payment of certain expenses.
The experts of The Welfont Group say the above benefits make a sale-leaseback agreement an attractive way for companies to sell their commercial properties.