In our first blog 'What is a Sale and Lease Back agreement for logistic real estate?' you learned more about the meaning of Sale & Lease Back, which factors play a major role and for which companies such an agreement could be interesting. In this blog we would like to elaborate on the added value that Sale and Lease Back can mean for your company.
After all, Sale and Lease Back is not only a more favorable form of financing compared to mortgage loans and bank financing, it also offers various other interesting advantages. For example, with a Sale and Lease Back agreement you can often determine yourself, in consultation with the other party, which monthly rent you will pay. Moreover, that rent can be paid with the cashflow resulting from the agreement.
These are already two attractive benefits of such an agreement. We’ll now elaborate on the other advantages of Sale and Lease Back for your company.
Financial added value
This is perhaps the most important benefit of Sale and Lease Back: freeing up the necessary capital. Can your company use additional financial resources to ensure efficiency and growth? Then a Sale and Lease Back agreement can be a good solution. By selling your real estate to RREC or Regulated Real Estate Companies, you again have access to financial resources that were blocked in the ownership of your commercial space.
Liquidity and creditworthiness
A Sale and Lease Back agreement increases the ratio between fixed and current assets. This gives your business the ability to pay off short-term debts to lenders. Converting capital from real estate to cash thus improves your capital structure.
Improved balance structure
With a Sale and Lease Back agreement you are able to replace your fixed asset with the cash proceeds of the sale, your current assets. So the balance of your company is strengthened with your own capital.
Through Sale and Lease Back, your company generates liquidity and as a result the real estate will disappear from your balance sheet. This transaction therefore increases the solvency or financial health of your company.
The Sale and Lease Back principle also has many interesting advantages in terms of taxation, for both Belgium and the Netherlands.
In Belgium, for example:
- Right to a tax spread on the capital gain of the sale
- Not having to pay registration duties and a reduction of the capital gains tax if the real estate is paid by the Regulated Real Estate Company in shares
In the Netherlands, one can invoke a tax deferral on the capital gain of the sale and a deduction of rent from the taxable profit.
When you opt for a Sale and Lease Back agreement, you sell your commercial property to a RREC, but you still maintain control over your property. In other words, you can still use the property to continue the operation of your organization, however without owning it. So it gives you the opportunity to sell non-strategic business premises, but also to continue your business in your office or commercial estate until a better location presents itself.
Focus on core business and growth
When your company no longer has the necessary financial resources, Sale and Lease Back can be the solution to continue the growth of your company. After all, you need capital to pay your employees, suppliers and invoices, build your inventory, and so on. If you do not do this, the productivity and therefore also the income of your company will drop. A Sale and Lease Back agreement therefore offers you the opportunity to maintain the focus on the growth of your core business.
A sale of your real estate to free up capital for better business operations is not something you want to announce to the outside world. A Sale and Lease Back agreement therefore always guarantees discretion and avoids an unnecessary change of address.
Would you like more information about the Sale and Lease Back principle and the potential benefits it can bring your business? Download the WDP ebook here and collect all the necessary information about Sale and Lease Back to get started. Are you curious about the added value of a Sale and Lease Back agreement at WDP? Read all about it in our next blog!