UofP - MBA550 - Team Assignment - Sikes - Research - 05-06-06

UofP MBA550- - Sale-leaseback financing is useful to corporations for Allowing the release of capital for redeployment elsewhere at a higher return

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Sale-leaseback financing is useful to corporations for: Allowing the release of capital for redeployment elsewhere at a higher return. Turning non-performing assets into available capital. This enables corporations to use the funds to enhance liquidity, reduce debt, expand operations and invest in core businesses. Converting real estate to cash on the balance sheet. During the lease, the rental payments are reflected in the financial statements as a contingent liability. Lowering of the debt-to-equity ratio of a corporation as the cash from the sale is often used for paying down debt. This improves the financial health of the company overall. Allowing the seller to retain long term use of the property. Providing 100% of the value of the real estate through the sale-leaseback financing. Providing a useful tax deduction for the seller. Rent payments are tax deductible. Providing equity financing. Lenrock Management Group, LP. (2006). Sale-leaseback financing is useful to corporations . Retrieved May 2, 2006, from http://www.lenrock.com/ salesleasebackuses.htm
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The sale-leaseback and financing program involves: Purchase . Our financing group purchases an existing fixed physical facility (but not the business activity conducted in that facility) from the client for a single cash payment in U.S. dollars. Leaseback . The client leases back the existing facility from our financing group for approximately 20 years, makes periodic lease payments in U.S. dollars, continues to own and control the business activity conducted in the facility, and retains all profits generated by the business activity. Financing . The client uses the cash payment, from the sale of the existing facility to our financing group, to finance the construction of a new physical facility, to expand the business, or for any other purpose. Option . At the end of the lease period, the client has the option to renew the lease on the existing facility, purchase the existing facility back, or move the business activity out of the existing facility and terminate the relationship. (go to Sale- Leaseback/PLUSTM program for other options.) The program may be used by corporations, developers, government agencies, or any entity that meets the program requirements. The physical facilities may be any type of infrastructure or real estate facility including power generating plants, large office complexes, toll roads and bridges, hospitals, water treatment facilities, airports, industrial estates, corporate headquarter buildings, large manufacturing plants, refineries, retail stores of a large chain store, and so forth.
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The sale-leaseback program is widely used in the United States to finance new capital projects and business expansion. The program has several unique benefits including no increase in the client’s balance sheet debt, no dilution of the client’s control over the business activity and profits, 100% financing from one source, and fast turn-
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This note was uploaded on 09/18/2011 for the course MBA 550 taught by Professor Whoknows during the Spring '08 term at University of Phoenix.

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UofP MBA550- - Sale-leaseback financing is useful to corporations for Allowing the release of capital for redeployment elsewhere at a higher return

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