Sale and leaseback

A sale and leaseback arrangement can be a useful way for a company to generate cash from its property portfolio without having to vacate, as would be the case in a standard sale.

The seller gets a lump sum up front from the ‘sale’, which can be invested elsewhere, but simultaneously signs a rental agreement – the ‘leaseback’ – committing to make lease payments to the buyer in return for continued occupancy.

If selling a building and then continuing to use it sounds too good to be true then it probably is. Over time, the high fixed cost of the lease payments will eat into future profits – creating what analysts call high ‘operational gearing’ – and eventually, depending on the terms of the deal, the seller may lose legal title to the property once the lease period expires.

Merryn

Claim 12 issues of MoneyWeek (plus much more) for just £12!

Let MoneyWeek show you how to profit, whatever the outcome of the upcoming general election.

Start your no-obligation trial today and get up to speed on:

  • The latest shifts in the economy…
  • The ongoing Brexit negotiations…
  • The new tax rules…
  • Trump’s protectionist policies…

Plus lots more.

We’ll show you what it all means for your money.

Plus, the moment you begin your trial, we’ll rush you over THREE free investment reports:

‘How to escape the most hated tax in Britain’: Inheritance tax hits many unsuspecting families. Our report tells how to pass on up to £2m of your money to your family without the taxman getting a look in.

‘How to profit from a Trump presidency’: The election of Donald Trump was a watershed moment for the US economy. This report details the sectors our analysts think will boom from Trump’s premiership, and gives specific investments you can buy to profit.

‘Best shares to watch in 2017’: Includes the transcript from our roundtable panel of investment professionals – and 12 tips they’re currently tipping. The report also analyses key assets, including property, oil and the countries whose stock markets currently offer the most value.