Sale-Leasebacks Are Having a Moment

Sale leaseback transactions involve a company selling a property and then leasing it back from the buyer. The seller gets an infusion of cash and the buyer benefits from a (hopefully) stable stream of income on an appreciating asset.  

With interest rates continuing to increase and credit markets remaining tight, sale-leaseback transactions are emerging as attractive options for both investors seeking returns and companies in need of capital. Capitalization rates, the measure of returns in sale-leaseback deals and calculated as annual income divided by purchase price, are reflecting the changing market. Cap rates are on the rise, averaging between 6.5% and 8.25%. The task for investors is to select the "best deals" on a risk adjusted basis taking into account price, industry, credit rating, location, etc. This is often more art than science with investors taking a variety of approaches to selecting properties.

Just another reminder that in a changing market there are always opportunities if you know where to look.