FAQ
How big is the part of the property’s value that you can gain with a sale and leaseback transaction?
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The seller may get 100% of the market value of the property under the leaseback transaction.
What is the average lease period?
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The average lease period is 15 years. The seller signs a long-term lease contract with the buyer and may continue their business activities within the property. The rent amount in the contract is usually stipulated in EUR and is inflation-indexed annually.
What may the company spend the acquired funds on?
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The seller may use the proceeds from sales for any purpose, depending on their needs, e.g. a new investment or repayment of part of liabilities. Additionally, there is some flexibility in terms of the lease contract language – the rent and the lease period are negotiable, allowing the Seller to settle lease liabilities on a comfortable level.
Does sale and leaseback transaction involve lengthy paperwork?
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Unlike other forms of financing, SLB does not require regular and extensive financial reporting. This way the seller may focus on their main business.
How long does it take to obtain financing?
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The entire transaction can be completed within 3-4 months. Again, however, we must point out that it is difficult to talk about an exact timeframe without reference to a specific case. The time needed to obtain financing can be affected by the valuation and analysis of the property or the negotiation of the terms of the contract.
What are the costs of this transaction?
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The only fixed cost is the monthly rent.
Can the terms of the lease be negotiated?
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Yes, the terms of the contract are flexible and negotiated taking into account the needs of both parties, including the length of the lease, rent and possible options for renewal.
Is the transaction beneficial from a tax perspective?
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Yes. Monthly rent payments are fully deductible as a business expense.
What are the key criteria to qualify for sale and leaseback?
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To take advantage of this financing method, a company should:
1) Demonstrate stable revenues, ideally above 100 million EUR; be part of a larger group that can provide additional security for the transaction.
2) Have an attractively located property, near large cities and major express roads.
3) The property should be in good condition.
What happens after the lease agreement ends in the sale and leaseback model?
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After the lease agreement ends, the tenant may choose to extend the lease, return the property to the property owner, or purchase the property if this option is provided in the contract.
What is the difference between property leaseback and sale leaseback?
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Although the terms are often used interchangeably, sale and leaseback and property leaseback are slightly different financial models—both allowing companies to release capital tied up in real estate.
Property leaseback (leasing zwrotny) involves the company selling its property to a leasing company, which then leases it back to the previous owner. The asset owner can still use the property but, in return, pays regular leasing installments.
On the other hand, sale and leaseback (najem zwrotny) involves the company selling the property to an investor or another entity and then renting it back for a set period, retaining the right to use it. Unlike leasing, sale and leaseback involves the sale of assets, followed by renting, not a lease with a buyout option.
What are the benefits for the lessee in a property leaseback arrangement?
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Property leaseback allows the lessee to increase financial liquidity by freeing up frozen capital, which can be allocated to other investments or the company’s current needs. Additionally, the lessee can continue to use the property, ensuring operational continuity without the need to relocate. Another benefit is the potential for tax optimization, as lease payments can be deducted as business expenses. Property leaseback can also improve the company’s balance sheet, as the property is sold, and the proceeds from the transaction can be recorded as revenue.
