Leaseback


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Leaseback

A transaction that occurs when a property owner sells property to another, who subsequently leases back possession of the property to the original owner.

sale-and-leaseback

A contractual agreement between an owner and an investor, under which the owner sells a property to the investor and then improves or develops it under the condition that the investor gives him a long-term lease of the premises.
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The sale and leaseback enables the group to release 65% of that value whilst retaining a long term lease, control of the operations and associated profits of the Hotel thereby keeping the remaining 35% within the group.
A well-structured sale leaseback can, however, still leave the franchisee in control of the property's physical condition by requiring certain standards of maintenance, rights of ways, easements and so on; all while accomplishing the franchisee's main objective of raising capital needed to grow when opportunities present themselves.
A key feature of the leaseback scheme is the ability for the owner to generate income by purchasing the freehold property outright and then leasing it back to a management company who specialises in the tourist management, maintenance and rental of these properties for a minimum nine-year period (renewable).
The investment market is becoming more sophisticated, and structured sale and leaseback opportunities are becoming more popular with both businesses looking to release poor performing capital for reinvestment, and investors with an appetite for investment opportunities.
The sale and leaseback option could negate the need for Iceland to ask shareholders to soften its debt problem in the form of a rights issue, a move which could face difficulties because of continuing nervousness in the equity markets.
After a sale and leaseback, the shareholder's basis in the property will be its fair market value, which usually is higher than the price the corporation originally paid (if the land and building have gone up in value).
Although a substantial modification after June 3, 1996, would be taken into account to determine whether the rental agreement is a disqualified leaseback or a long-term rental agreement.
30 June 2017 - A subsidiary of Guernsey-based hotel company PPHE Hotel Group Ltd (LSE: PPH) has exchanged contracts to sell and leaseback Park Plaza London Waterloo, the company said.
But marketing director Ian McLernon said this week: "Most parties proposing a takeover were looking at sale and leaseback afterwards anyway, so we thought we might as well do it ourselves.
The benefits of a sale-and-leaseback will be available only if there is both a valid sale and a valid leaseback.
The transaction must serve a business purpose and economic reality must be evidenced by a written leaseback agreement that requires payment of a reasonable rent.