Tunick, Britt Erica
May 2003
Investment Dealers' Digest;5/19/2003, Vol. 69 Issue 20, p34
Trade Publication
Bad publicity for synthetic leases has been a blessing for real estate sale-leasebacks. Sale-leaseback transactions have been on the rise since the beginning of 2003, according to Kevin Nunnink, chairman ofIntegra Realty Resources, a real estate consultancy. They've become popular because they provide quick capital to companies that otherwise might not be strong enough to penetrate the public markets and are usually cheaper than loans. They are also quite attractive because they can be done off-balance sheet without making investors inquisitive. In a sale-leaseback transaction, a company in need of financing sells a real estate property to a second party with the clause that the selling company will lease that property themselves, usually for a period of between 15 years and 20 years at a rate that cannot exceed its lease market value. Unlike synthetic leases, at the end of that period the property cannot be put back to the selling company. Market conditions and a decline in industrial real estate valuations have also had a hand in the rise of sale-leasebacks.


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