Sale and leaseback transactions
Obtain additional capital for development and investments.
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We are actively seeking real properties owned by companies with annual turnover above
100 million PLN.
100 million PLN.
Sale and leaseback consists of two interconnected stages. First, the owner sells their property to an investor, and then signs a lease agreement, thus continuing to run their business within the same scope and on the same property. The agreement often guarantees a pre-emption right to the seller following the lease period.
Sale and leaseback – features
Sale and leaseback is a solution providing many companies with significant resources for development. Banks capital sources often require own contribution. Leaseback provides capital representing 100% of the property’s value. This is particularly advantageous for big companies with turnover exceeding 100 million PLN, whose assets include essential manufacturing, office, warehouse or industrial properties.Benefits for your company
- Financing in the amount of the property’s market value
- Full flexibility in spending the money earned on the sale – investments, liability repayment, dividend
- Lease period, purchase option, service fees – at the parties’ decision
- Monthly rent independent from WIBOR – a cheaper alternative in the time of increasing interest rates
- Quick decision process
Sale and leaseback transactions
Sale and leaseback is a proven and attractive way for medium and large companies to gain capital. In Western Europe and United States of America, this has been a successful method for many years, and both the number and the volume of leaseback transactions are continuously growing. In Poland, this form of funding is gradually becoming popular among big company owners aiming at increasing their development, as well as those struggling with restructuring.
The idea behind the sale and leaseback
The sale and leaseback process can be described in one short sentence: “A company sells their real property and then leases the same property back”. Two agreements result from this transaction: the first one is the real property sales contract, and the second one is the lease contract for the same real property. The proposed lease period is long, 10 years minimum, with extension possibility or pre-emption or purchase option – fully safeguarding further unlimited transactions of the company within the facility.
Sale and leaseback benefits
The benefits from such a transaction are of key importance. The seller gains funds, hitherto frozen in the real property; the funds can be further spent on new investments, liability repayment or dividend distribution. This is also a quick and often cheaper method of gaining funds than through credit. You maintain the full right to use the real property in the same capacity as before. Moreover, the enterprise may include the rent in the costs incurred in connection with earning the revenues. On the other hand, the buyer – the fund – gains stable inflow from the rent for many years, which is its main goal.
Sale and leaseback in Poland
In Poland, decision-makers are increasingly interested in the possibility to utilize sale and leaseback for their companies’ development. They perceive the transaction as a significant alternative to traditional sources of financing and as a way to improve financial performance of their organizations – in particular those with high revenue, where capital needs are the highest.
Sale and leaseback is most often used by companies owning industrial, logistic, office or commercial real properties. Such companies as Danone, Orange, Philips, METRO or DSV, among others, have used this solution in recent years. The transactions they have made are worth over 1 billion EUR.
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Media on sale and leaseback transactions
Webinar
Together with the French-Polish Chamber of Commerce, we organized a webinar that provided lots of information on sale and leaseback transactions.
Worth knowing
Does your company want to continue to grow, is there a need to finance ambitious undertakings, or maybe your existing loans have become a significant burden? – if so, the sale leaseback transaction is the perfect solution for this situation.
FAQ
How big is the part of the property’s value that you can gain with a sale and leaseback transaction?
The seller gets 100% of the market value of the property under the leaseback transaction.
What is the average lease period?
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?
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?
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?
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?
The only fixed cost is the monthly rent.
Can the terms of the lease be negotiated?
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?
Yes. Monthly rent payments are fully deductible as a business expense.
What are the key criteria to qualify for sale and leaseback?
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?
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 real estate leasing and sale leaseback?
Although the terms are often used interchangeably, sale and leaseback and real estate leasing are slightly different financial models—both allowing companies to release capital tied up in real estate.
Real estate leasing (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?
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.
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