Analysis of a Sale-Leaseback

A sale-leaseback allows a company to raise money from the sale of its property while retaining its use, so a sale-leaseback opportunity typically happens when an owner occupant/tenant would rather not relocate.
When the owner-occupant company sells its building to an investor, the investor is buying the income stream that this tenant or seller would be providing. The higher the income stream, theoretically, the higher the value. But there are challenges, such as when the current owner agrees to an extremely above-market lease rate. Remember, the investor is buying this income stream, so should the seller go out of business, then the investor has the challenge of trying to release the property at an above-market lease rate – and that dog don’t hunt. That is why it is extremely important for the potential seller to understand the realistic lease rates so that they can better appreciate the investor’s point of view.
Now in a sale-leaseback, if the potential seller signs a slightly above-market lease rate, and is an extremely well-capitalized company with a good track record, the differential between the contract lease rate and the actual market lease rate may be insignificant. The length of the lease term is also important to investors.
Investors look closely at the reasoning and financial condition of the seller (now the new tenant) in order to determine the reasons for the sale. Due diligence is very important for all parties.
Sale-leasebacks can be an excellent way for an owner occupant to generate cash to pursue other opportunities like growing their core business or investing in a venture that would provide a greater return to the seller or perhaps to return capital to shareholders.

Published on Commercial Property Executive by Randy Mason

http://www.cpexecutive.com/newsletters/capitalmarkets-newsletter/investment-column/analysis-of-a-sale-leaseback/

Personal Guarentees

There is an abundant amount of information on the internet about personal guarantees (PG) so I will be brief. 

In commercial real estate, generally there are 2 times you can negotiate a personal guarantee. The first time is when you are moving into a new location and the second is when you are renegotiating your lease.

 Moving into a new location is when you have the most leverage in the negotiations. Presuming you are a business that has been around longer than 3-5 years and have a good track record in paying you other bills and rent, show a healthy profit and loss statement and balance sheet a full term PG may not be warranted.

 As the new landlord has no payment history with you, it is reasonable to provide them with some type of limited PG, say 1-2 years if it’s a 5 year lease term. If you are not late paying them the rent and other expenses the PG should go away after that period of time.

 You can also negotiate the amount of money the PG will cover. This is a function of how much the landlord invested in the space for tenant improvements just for your specific use. If you have a specialized use, it’s not unusual for the landlord to want to recapture much of those costs in the event the “business goes out of business”.

 The second time you can negotiate a PG is when you are about to renew and renegotiate your lease. Presuming the business has paid its rent on time and has a strong profit and loss statement and balance sheet a PG may not be warranted as the business has proven themselves for many years.

 If the business has been late on its rent numerous times or the landlord is investing money into tenant improvements some type of PG may be warranted.

 Alternatives to PG’s could be an increased security deposit or a letter of credit.

 In these interesting times it is not unreasonable for the landlord to require some type of PG if the business or entity in not financially sound and solid. Professional negotiation on this point can save the “guarantor” a lot of heart ache should the landlord require a personal guarantee.

Rentable Vs. Usable Square Feet

Check out Randy’s new Idea To Share!

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Strike While It’s Hot!

Check out this new Idea To Share from Randy Mason

For more Ideas To Share visit the videos section of this website and don’t forget to check out my new website occree.com!

Another Idea To Share

Help! I Need My Keys Now!

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Idea To Share

Blend and Extend

MORE IDEAS TO SHARE COMING SOON! VISIT THE VIDEOS SECTION OF THIS WEBSITE TO SEE MORE!

21 Hilarious “Laws of the Office”

Have you laughed today?

http://www.myhumor.org/clean-jokes/business-jokes.asp

1. If you can’t get your work done in the first 24 hours, work nights.
2. Don’t be irreplaceable, if you can’t be replaced, you can’t be promoted.
3. It doesn’t matter what you do, it only matters what you say you’ve done and what you’re going to do.
4. After any salary raise, you will have less money at the end of the month than you did before.
5. The more you put up with, the more you are going to get.
6. You can go anywhere you want if you look serious and carry a clipboard.
7. When the bosses talk about improving productivity, they are never talking about themselves.
8. If at first you don’t succeed, try again. Then quit. No use being a fool about it.
9. There will always be beer cans rolling on the floor of your car when the boss asks for a ride home from the office.
10. Keep your boss’s boss of your boss’s back.
11. Everything can be filed under “miscellaneous.”
12. Anyone can do any amount of work provided it isn’t the work he/she is supposed to be doing.
13. Important letters that contain no errors will develop errors in the mail.
14. If you are good, you will be assigned all the work. If you are really good, you will get out of it.
15. You are always doing something marginal when the boss drops by your desk.
16. People who go to conferences are the ones who shouldn’t.
17. If it wasn’t for the last minute, nothing would get done.
18. At work, the authority of a person is inversely proportional to the number of pens that person is carrying.
19. When you don’t know what to do, walk fast and look worried.
20. No matter how much you do, you never do enough.
21. The last person that quit or was fired will be held responsible for everything that goes wrong.

The Secret of Success: “The Last Lecture” by Randy Pausch

Here are some encouraging/motivating quotes from Randy Pausch in The Last Lecture. I hope you find Randy’s words as inspiring as I do.

On September 18, 2007, computer science professor Randy Pausch stepped in front of an audience of 400 people at Carnegie Mellon University to deliver a last lecture called “Really Achieving Your Childhood Dreams.” With slides of his CT scans beaming out to the audience, Randy told his audience about the cancer that is devouring his pancreas and that will claim his life in a matter of months. On the stage that day, Randy was youthful, energetic, handsome, often cheerfully, darkly funny. He seemed invincible. But this was a brief moment, as he himself acknowledged. 

• Better to fail spectacularly than do something mediocre.
• Brick walls are there for a reason. The brick walls are not there to keep us out. The brick walls are there to show how badly we want something. Because the brick walls are there to stop the people who don’t want something badly enough.
• If there’s anything I want to do so badly, I should have already done it.
• We can’t change the cards we are dealt, just how we play the hand.
• Be good at something; it makes you valuable…Have something to bring to the table, because that will make you more welcome.
• I’ve never understood pity and self-pity as an emotion. We have a finite amount of time. Whether short or long, it doesn’t matter. Life is to be lived.
• It is not about achieving your dreams but living your life. If you lead your life the right way, the karma will take care of itself, the dreams will come to you.

 

Randy’s lecture has become a phenomenon, as has the book he wrote based on the same principles, celebrating the dreams we all strive to make realities. Sadly, Randy lost his battle to pancreatic cancer on July 25th, 2008, but his legacy will continue to inspire us all, for generations to come.

5 Reasons You Should Acquire a Commercial Real Estate Broker

A Commercial Real Estate Broker…

1. Has knowledge of the process and product.
2. Has a high degree of professionalism offering the ability to cut down the number of complications during the transaction process.
3. Will have a vast amount of knowledge, providing the client with a greater advantage when negotiating with landlords.
4. With a well established track record is beneficial, in that, the client may be assured that the broker has dealt with circumstances similar to their own.
5. Is primarily focused on the current objective, leaving out distractions that may conflict with a successful transaction.

 

Information courtesy of Strategies in Tenant Representation provided by the Society of Industrial and Office REALTORS®

Ever wonder what is on your hotel magnetic key card?

Answer

a. Customer’s name

b. Customer’s partial home address

 c. Hotel room number

 d. Check-in date and out dates

 e. Customer’s credit card number and expiration date!

When you turn them in to the front desk your personal information is there for any employee to access by simply scanning the card in the hotel scanner. An employee can take a hand full of cards home and using a scanning device, access the information onto a laptop computer and go shopping at your expense.

 Simply put, hotels do not erase the information on these cards until an employee reissues the card to the next hotel guest. At that time, the new guest’s information is electronically ‘overwritten’ on the card and the previous guest’s information is erased in the overwriting process.

 But until the card is rewritten for the next guest, it usually is kept in a drawer at the front desk with YOUR INFORMATION ON IT!

 The bottom line is: Keep the cards, take them home with you, or destroy them. NEVER leave them behind in the room or room wastebasket, and NEVER turn them into the front desk when you check out of a room. They will not charge you for the card (it’s illegal) and you’ll be sure you are not leaving a lot of valuable personal information on it that could be easily lifted off with any simple scanning device card reader.

 For the same reason, if you arrive at the airport and discover you still have the card key in your pocket, do not toss it in an airport trash basket. Take it home and destroy it by cutting it up, especially through the electronic information strip!

If you have a small magnet, pass it across the magnetic strip several times. Then try it in the door, it should not work.  It erases everything on the card. Information courtesy of:

 Metropolitan Police Service.

 PLEASE FORWARD to friends and family

This is pretty good info. Never even thought about key cards containing anything other than an access code for the room!