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Your Trusted Source For Real Estate Sale-Leaseback Expertise In Denver

A real estate sale-leaseback transaction, like nearly every significant financial or real estate endeavor, has pros and cons that need to be carefully considered. Ultimately, if the sale-leaseback route is your best path forward, you want to have an experienced commercial real estate sale-leaseback broker representing your best interests. Let’s talk about the sale-leaseback process and what the unique benefits are for the owner-occupant/seller.

What Does A Sale-Leaseback Entail?

A sale-leaseback transaction allows a corporate property owner/occupant to take advantage of the property value increases seen over past several years. The owner/occupant can unlock the equity in their owned commercial real estate assets without losing control or being forced to relocate their business for a long period of time - often as long as 5 to 25 years. On its surface, the steps to complete the real estate sale-leaseback transaction are simple:

1. Owner/occupant (the seller) simultaneously signs a new long-term lease when Fountainhead’s expert has identified an unrelated qualified investor (the buyer) to acquire the commercial real estate asset.
2. After closing, owner/occupant (the seller) receives the commercial real estate sale proceeds and no longer pays a mortgage but becomes a rent-paying tenant.
3. Investor (the buyer) becomes the landlord with all the responsibilities, obligations and rights stipulated in the lease agreement.

To further protect the owner/occupant’s (now the tenant’s) interest, sale-leaseback contracts may include a lease renewal option or occasionally the contract will include a repurchase option for owner/occupant (now the tenant) to repurchase the property.

Real Estate Sale-Leaseback Pros And Cons

A real estate sale-leaseback offers many unique advantages to the seller, however, it also includes disadvantages that are important to consider when making decisions. Let’s talk about the specifics in greater detail.

Benefits For Owner/Occupant (The Seller)

Among the most notable benefits of a real estate sale-leaseback for the seller is the conversion of commercial real estate equity into cash proceeds. The seller retains control of the property per a lease agreement, while receiving a significant cash infusion. This new capital can be more efficiently invested in operating and growing the seller’s business. Sellers will often use the cash infusion to fund an expansion (new office, industrial or retail location) or acquire a complementary business as an alternative to conventional financing. Some sellers may elect to utilize this new capital to reduce existing corporate debt. Sellers, with other more-profitable locations, may use the real estate sale-leaseback proceeds to fund tenant or capital improvements at seller’s other location(s). In general, the seller will benefit from investing the new capital in any business endeavor which has a higher return on equity (ROE) than that of the commercial real estate asset.

Additionally, a business owner that also owns and occupies commercial real estate and is considering selling the business to a larger corporate entity or business competitor will not want the commercial real estate asset to be an ‘anchor’. On occasion during merger and acquisition (M&A) discussions, a prospective business buyer may discount the value of the business if buyer intends to consolidate operations elsewhere and does not need the ‘anchor’ property.

Another unique benefit of a real estate sale-leaseback from the seller’s perspective is the flexibility it offers occupants. Debt and usury restrictions become a moot point, while also reducing the attractive nature of undervalued real estate by corporate raiders.

Disadvantages For The Seller

Presented with the many benefits a real estate sale-leaseback can offer the seller, you may be ready to make the jump. However, it is important to consider the potential disadvantages.

Depending upon sale-leaseback terms and then-current conventional mortgage financing rates, the costs associated with a real estate sale-leaseback can be higher than conventional mortgage financing. Additionally, the seller, now the tenant, will be committed to the current commercial real estate facility for the entire lease term unless the seller (now the tenant) has the right to sublease the property (which is common) or has a lease termination option.

Lastly, the seller in a real estate sale-leaseback transaction, is legally bound by the lease terms without the same flexibility offered to the owner/occupant. If the buyer later sells the asset or files bankruptcy, the lease will remain in full force and effect but the seller will not control who owns the property in the future.

Real Estate Sale-Leaseback By Professionals

There are numerous factors to consider, from day-to-day operational responsibilities and business growth expectations to alternative financing options and potential tax liability. Our real estate sale-leaseback experts can help you determine if a sale-leaseback transaction makes sense for your organization.

Contact Fountainhead Commercial today to learn more about the real estate sale-leaseback process.

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Denver Metro Commercial Property Investment Advisors Are Your Source For Expertise

When looking to purchase or sell commercial real estate investment properties, savvy investors seek out an industry partner to provide relevant market intelligence, best-in-class financial analysis, and effective negotiation strategies so an investor can make the best decision to complement the overall investment strategy. With almost 20 years in the industry, CCIM designated advisor, Lowrey Burnett, has made a name for himself as a trusted investment property advisor. Learn how Fountainhead Commercial can help you make your first investment or modify your existing portfolio of investment properties.

When Is The Right Time To Buy Or Sell?

Navigating and understanding the current market conditions, as well as accurately forecasting future market conditions is, hands-down, the most difficult part of buying or selling an investment property. No one has a crystal ball that always accurately predicts future events or market conditions. However, our experienced real estate investment advisor, who has also attained the prestigious Certified Commercial Investment Member (CCIM) designation, can help you gain an intimate understanding of the then-current market nuances while receiving reasonable market projections such as "most likely," "most conservative," and "most aggressive" outcomes. In doing so, each client can confidently make the decisions that align with their overall investment strategy.

Buying Or Selling A Commercial Property For The Owner/Occupant

At Fountainhead Commercial, we specialize in office and industrial properties. If your business is seeking to sell or purchase this type of commercial space, you want to talk to our investment broker. Whether it is your 1st location or your 50th location, you want an experienced commercial real estate broker to represent your interests and minimize your commercial real estate costs while maximizing operational efficiency for your business.

Acquisition Or Disposition Of An Income-Producing Real Estate Investment

As a CCIM-designated commercial real estate investment advisor, our industry expert at Fountainhead Commercial will provide sound guidance while standing by your side throughout the entire acquisition or disposition process. This includes, but is not limited to, the following actions that will benefit each investor during the decision-making process:

• Determine investor's risk tolerance
• Determine investor's yield and income expectations and requirements
• Determine property-type, geographic preference, and tenancy characteristics desired by investor
• Identify qualified buyers or suitable investments that align with client's criteria
• Develop a comprehensive financial analysis for each investment option
• Create and discuss comparison matrix for each option
• Submit and negotiate proposals, counter proposals, and LOIs
• Arrange tours of short-list investment properties, as necessary
• Purchase and Sale Agreement (PSA) review and negotiate final deal terms
• Compile or review all Due Diligence documents
• Closing with title company 

Additionally, our real estate investment advisor can help a seller navigate the 1031 Exchange process to relinquish an investment property and defer 100 percent of all capital gains taxes.

An Investment Broker You Can Trust

Fountainhead Commercial is proud to offer commercial real estate investment property representation for investors and owner/occupants who are considering buying or selling commercial real estate. Our investment property expert is well-versed in the nuances of both sides of a real estate transaction and will advocate on your behalf to ensure each client is buying, selling, or exchanging at the right time, to the right entity, and at the right price.

If you are considering investing in commercial real estate, contact Fountainhead Commercial today to learn more.

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1031 Exchange Expert Is Your Source For Unparalleled Industry Prowess In The Denver Market

Investing in commercial real estate can be highly lucrative. Should you choose to sell an investment property that has increased in value since originally purchased, you’ll want to work with an experienced 1031 Exchange broker to protect your gains. A 1031 Exchange is a strategy to defer paying large capital gains taxes when you sell an investment property by reinvesting the proceeds into another investment property. Though based in Colorado, Fountainhead Commercial has the experience and ability to complete the 1031 Exchange transaction process in all 50 states.

Fountainhead Commercial is proud to be your local 1031 Exchange expert. Let’s talk about how this process works and what you can expect from us as your 1031 Exchange broker.

What Is A 1031 Exchange?

A 1031 Exchange, also known as a Starker Exchange or Like-Kind Exchange, is a powerful tax-deferral strategy defined and allowed under section 1031 of the IRS Code. It is important for an investor to understand their potential capital gains tax liability, which varies state to state. Long-term capital gains are currently taxed at the Federal level at a rate as high as 20 percent, depending on the taxpayer's income. An additional 3.8 percent capital gains tax is also applicable at the Federal level due to the implementation of Obama Care. Furthermore, at the State level, an investor's gains can be taxed as high as 12.3 percent in California or as low as 0.0 percent in Texas. Some local municipalities, like New York, also have additional capital gains taxes. In general, most Colorado tax payers can estimate that they will incur as much as a 30 percent tax liability on any long-term capital gains.

A Simplified Example Of A 1031 Exchange

Speaking in round numbers, consider you made an all-cash purchase of an investment property or property used for your business for $1,500,000 and after at least one year of ownership a buyer offers you $2 million. That equates to $500,000 in capital gains realized after closing. Assuming your tax liability makes up approximately a third of that gain, you would owe the IRS $165,000 in capital gains taxes which reduces the net proceeds you have available to reinvest. Alternatively, if you enlist the expertise of a 1031 Exchange broker to execute a 1031 Exchange transaction, you can defer paying $165,000 to the IRS and reinvest the entire capital gain, thus allowing you to purchase a replacement property worth at least $2 million.

This increased purchasing power is one of the key advantages of a 1031 Exchange. With the right support from a Qualified Intermediary, real estate attorney, tax advisor, and 1031 Exchange broker, a 1031 Exchange is a straight-forward process. However, you must act within strict timelines and follow established IRS rules in order to reap the benefits of deferred capital gains.

Delayed 1031 Exchange

A “delayed” 1031 Exchange transaction is the most common method used by investors/taxpayers. In this case, the investor/taxpayer will relinquish or sell the original investment property first and close on the acquisition of the 'replacement property' within the designated timeline.

Key Timelines To Defer Capital Gains Taxes

Our 1031 Exchange expert can help real estate investors adhere to the strict timelines required for a successful exchange. Per the IRS code, you only have 45 days to identify, in writing, all potential investment properties you want to consider acquiring. You only have 180 days in which to complete the acquisition or 'up leg' transaction. It is critical to understand that both the 45-day and 180-day timelines begin on the date that you sell your original investment, or relinquished property. It’s easy for time to get away from you as you peruse the available investment listings, arrange property tours, and determine which properties might be a good fit based upon your investment strategy. This is where our leading 1031 Exchange broker can come into play.

Reverse 1031 Exchange

Alternatively, a “reverse exchange” involves acquiring a replacement property before selling the relinquished property. This is generally a more expensive option, but it is often the better solution for investors who want to purchase a specific replacement property prior to finding a qualified buyer for their relinquished property.

Other, less common, 1031 Exchange transactions include Simultaneous Exchange and Improvement Exchange.

Benefit From A 1031 Exchange Expert At Fountainhead Commercial

Certified Commercial Investment Member (CCIM)-designated 1031 Exchange broker, Lowrey Burnett, has extensive experience with 1031 Exchange transactions and passes the benefits of his expertise onto his clients. Because taxable gains are a key concern to every investor, Fountainhead Commercial has streamlined our 1031 Exchange support process to facilitate a stress-free experience for our clients. By enlisting the help of our 1031 Exchange expert, you reap the benefits of a representative who is looking out for the best interest each client and related investments at every step of the way. From providing timely market information, determining the right type of exchange, identifying suitable replacement properties, and arranging property tours across the United States to negotiating purchase prices and terms on the investor's behalf, reviewing due diligence documents, and closing on your replacement property with the IRS-mandated timelines, you gain a true advocate when you engage Fountainhead Commercial to handle your 1031 Exchange.

If you want to sell an investment property or property used for business while deferring your capital gains tax liability with the support of a 1031 Exchange expert, contact Fountainhead Commercial today.