After seeing increased popularity in the third quarter, sale leaseback deals seem poised for strong growth in the months ahead.
Real estate experts believe that sale leasebacks, in which a company sells a property and then leases it back from the new owner, will become increasingly prevalent heading into 2021 for a number of reasons.
Stan Johnson Company’s Mike Matter agreed that sale leasebacks were enticing to buyers and sellers now.
“The seller can remove any debt they have on the subject property they are selling and free up equity and apply that to their business and add that to their balance sheet and pay off their debts,” he said. “It makes sense to a lot of operators as real estate returns in L.A. County are pretty weak today.”
He added that there are some tax benefits for companies selling these properties.
For buyers, Matter said there are usually built-in rent increases and lots of financial transparency from tenants.
Matter said there has been a “gradual uptick in sale leaseback activity in industrial in spite of Covid,” and thinks there will be more looking forward, especially in industrial but not as many on some other properties, like casual dining establishments. Quick service restaurants could see some, though, he said.
Matter added that he has some clients who are now looking at sale leaseback opportunities.
“I think it will be a bigger part of it (overall sales) in the next year or two,” he said.