One of several common concerns may arise when considering a sale leaseback, including –
Concern: Selling real estate may be interpreted by the market that the company is in financial trouble.
Solution: Sale Leaseback structure allows companies to maintain operating control of the real estate with no visible changes of ownership.
Concern: The company is losing a fixed asset that we may want to own again in the future.
Solution: SAS can provide a buy-back option during and at the end of the lease term to provide flexibility.
Concern: The lease rent and terms may change in the future.
Solution: The lease rent is known throughout the term of the lease. The lease rent will not be affected should property taxes, insurance and other property-related costs increase during the term.
Concern: Under current IFRS guidelines, the real estate asset does not come off the balance sheet under a sale leaseback.
Solution: It is recategorized as a “lease asset” and fully depreciated over the lease term and the lease payments are tax deductible. Under JGAAP, there remains a structure that does remove the asset from the balance sheet.
