Leaseback - Revision history

Designing Buildings at 08:13, 17 December 2020

2020-12-17T08:13:54Z

← Older revision		Revision as of 08:13, 17 December 2020
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	* Speculative construction.		* Speculative construction.

−	[[Category:~~Organisations~~]] [[Category:~~DCN_Organisation~~]] [[Category:Cost_/_business_planning]] [[Category:Property_development]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Organisations]] [[Category:Cost_/_business_planning]] [[Category:Property_development]]

Editor at 14:39, 4 July 2018

2018-07-04T14:39:19Z

← Older revision		Revision as of 14:39, 4 July 2018
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	* Property development finance.		* Property development finance.
	* Real Estate Investment Trusts.		* Real Estate Investment Trusts.
		+	* Remortgage.
	* Special purpose vehicles.		* Special purpose vehicles.
	* Speculative construction.		* Speculative construction.

−	[[Category:Organisations]] [[Category:Cost_/_business_planning]] [[Category:Property_development]]	+	[[Category:Organisations]] [[Category:DCN_Organisation]] [[Category:Cost_/_business_planning]] [[Category:Property_development]]

Editor at 12:41, 26 April 2017

2017-04-26T12:41:15Z

← Older revision		Revision as of 12:41, 26 April 2017
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	* Funding options.		* Funding options.
	* Joint venture.		* Joint venture.
		+	* Mezzanine finance.
	* Partnering and joint ventures for construction.		* Partnering and joint ventures for construction.
	* Private Finance Initiative		* Private Finance Initiative

Designing Buildings at 13:08, 19 April 2017

2017-04-19T13:08:22Z

← Older revision		Revision as of 13:08, 19 April 2017
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−	~~Leaseback,~~ also known as sale-and-leaseback~~, is~~ a financial arrangement in which the party selling an asset (usually property) leases it back from the purchaser. This is ~~often done as~~ a long-term arrangement, ~~meaning that they are still able~~ to use the asset but no longer ~~own~~ it.	+	The term 'leaseback' (also known as sale-and-leaseback) refers to a financial arrangement in which the party selling an asset (usually property) leases it back from the purchaser. This is generally a long-term arrangement, allowing them to use the asset but no longer owning it. The seller of the asset becomes the lessee, and the purchaser becomes the lessor.

−	~~The specifics~~, ~~i.e~~. the ~~amount of payments and the time period, are made immediately after~~ the sale of the asset. ~~The seller~~ of ~~the asset becomes the lessee, and the purchaser becomes the lessor~~.	+	Companies often raise capital by taking up debt and giving up equity, in order to grow the business. Leaseback is neither debt nor equity; the company doesn’t increase its debt load but gains access to capital through the sale of assets, while not having capital tied up in the asset. Tax benefits can sometimes be gained through the use of leasebacks.

−	~~Companies often try to raise capital by taking up debt and giving up equity,~~ in ~~order to grow the business~~. ~~Leaseback~~ is ~~neither debt nor equity; the company doesn’t increase its debt load but gains access to capital through the sale of assets, while not having capital tied up in~~ the asset~~. Tax benefits can sometimes~~ be ~~gained through~~ the ~~use of leasebacks~~.	+	The arrangement is rather like that of a pawnshop in that a company exchanges a valuable asset for a certain amount of money. The difference is that there is no expectation that the asset will be bought back by the company.

−	~~The arrangement is rather like that~~ of a ~~pawnshop~~ in ~~that a company exchanges a valuable~~ asset for ~~a certain amount of money~~. The ~~difference~~ is that ~~there is no expectation~~ for ~~the asset to be bought back by the company~~.	+	Builders and construction companies with high fixed assets are common users of leaseback arrangements. They can be useful when a company needs to use the capital invested in an asset for other investments, but where they still require the asset in order to operate. The advantage to the lessor is that they receive a guaranteed lease with stable payments for a specified period of time.

−	~~Builders and construction companies with high fixed assets are common users of leaseback arrangements. It can be useful when a~~ company ~~needs~~ to ~~use~~ the ~~capital invested in an~~ asset ~~for other investments, but they still require~~ the ~~asset in order to operate. The advantage to~~ the ~~lessor is that they receive a guaranteed lease with stable payments for a~~ specified ~~period of time~~.	+	The company may have the option to repurchase the asset at the end of the term or at specified points within the term.

−	~~The company may have the option to repurchase the asset at the end of the term or at specified points within the term. The difficulty may~~ be in terms of ~~determining~~ the extent to which the company has ~~removed itself from the associated~~ risks and liabilities of the asset ~~when~~ it ~~sells~~ it to the lessor.	+	There can be complexities in terms of defining the extent to which the company still has risks and liabilities relating to the asset even though it has sold it to the lessor.

−	~~The disadvantage of leasebacks is~~ that the original owner loses any further interest in the growth of the asset’s value. In the case of property, the rent ~~will~~ be revised upwards at ~~normal~~ intervals, so what may have appeared ~~like~~ a cheap source of funding in the short term, ~~may~~ prove to be ~~more~~ expensive ~~when facing higher rent bills in~~ the ~~future~~.	+	Other disadvantages include the fact that the original owner loses any further interest in the growth of the asset’s value. In the case of property, the rent is also likely to be revised upwards at regular intervals, so what may have appeared to be a cheap source of funding in the short term, can prove to be expensive over the long term.

	To avoid this drawback, an off-balance sheet version of leasebacks can be used. A 50-50 joint-owned company is set up which borrows the bulk of the capital to buy the assets, granting the vendor a lease in the normal way. Via its half-ownership of the joint company, the original owner retains an interest in the performance of the properties in the future.		To avoid this drawback, an off-balance sheet version of leasebacks can be used. A 50-50 joint-owned company is set up which borrows the bulk of the capital to buy the assets, granting the vendor a lease in the normal way. Via its half-ownership of the joint company, the original owner retains an interest in the performance of the properties in the future.

Editor: Created page with "Leaseback, also known as sale-and-leaseback, is a financial arrangement in which the party selling an asset (usually property) leases it back from the purchaser. This is often do..."

2017-04-19T11:57:14Z

Created page with "Leaseback, also known as sale-and-leaseback, is a financial arrangement in which the party selling an asset (usually property) leases it back from the purchaser. This is often do..."

New page

Leaseback, also known as sale-and-leaseback, is a financial arrangement in which the party selling an asset (usually property) leases it back from the purchaser. This is often done as a long-term arrangement, meaning that they are still able to use the asset but no longer own it.

The specifics, i.e. the amount of payments and the time period, are made immediately after the sale of the asset. The seller of the asset becomes the lessee, and the purchaser becomes the lessor.

Companies often try to raise capital by taking up debt and giving up equity, in order to grow the business. Leaseback is neither debt nor equity; the company doesn’t increase its debt load but gains access to capital through the sale of assets, while not having capital tied up in the asset. Tax benefits can sometimes be gained through the use of leasebacks.

The arrangement is rather like that of a pawnshop in that a company exchanges a valuable asset for a certain amount of money. The difference is that there is no expectation for the asset to be bought back by the company.

Builders and construction companies with high fixed assets are common users of leaseback arrangements. It can be useful when a company needs to use the capital invested in an asset for other investments, but they still require the asset in order to operate. The advantage to the lessor is that they receive a guaranteed lease with stable payments for a specified period of time.

The company may have the option to repurchase the asset at the end of the term or at specified points within the term. The difficulty may be in terms of determining the extent to which the company has removed itself from the associated risks and liabilities of the asset when it sells it to the lessor.

The disadvantage of leasebacks is that the original owner loses any further interest in the growth of the asset’s value. In the case of property, the rent will be revised upwards at normal intervals, so what may have appeared like a cheap source of funding in the short term, may prove to be more expensive when facing higher rent bills in the future.

To avoid this drawback, an off-balance sheet version of leasebacks can be used. A 50-50 joint-owned company is set up which borrows the bulk of the capital to buy the assets, granting the vendor a lease in the normal way. Via its half-ownership of the joint company, the original owner retains an interest in the performance of the properties in the future.

= Find out more =

=== Related articles on Designing Buildings Wiki ===

* Construction loan.
* Discounted cash flow.
* Equity and loan capital.
* Funding options.
* Joint venture.
* Partnering and joint ventures for construction.
* Private Finance Initiative
* Property development finance.
* Real Estate Investment Trusts.
* Special purpose vehicles.
* Speculative construction.

[[Category:Organisations]] [[Category:Cost_/_business_planning]] [[Category:Property_development]]