Consider sale and leaseback as a route to survival
West Midlands companies strapped for cash due to the impact of the coronavirus outbreak on their business could be sitting on the answer.
Property consultant Ed Siddall-Jones is urging under pressure businesses who own their premises to consider the merits of sale and leaseback as a route to cash.
“Many businesses are asset rich and cash poor, and the current problems are only going to exacerbate this,” he said.
He stressed that professional advice is essential for those considering going down this route.
“There are advantages and disadvantages in sale and leaseback which need to be carefully weighed before a decision is made.”
A sale and leaseback is when a company sells a building it both owns and occupies and enters into a lease agreement with the buyer of the building. In other words, the original owner sells the property to an investor who immediately becomes his landlord.
Mr Siddall-Jones said: “The advantages are that the seller is able to realise some capital immediately and has much needed cash on tap to see out the next few months.
“The buyer acquires a property along with a long term lease at an attractive yield.”
Properties that are suitable for sale and leaseback include properties, which may be offices, retail or industrial, with a single occupier.
Companies with a strong trading history and a healthy balance sheet may receive a better offer of cash from an investor, as will tenants who are willing to enter into leases of at least five years or more at or close to the prevailing market rent.
Mr Siddall-Jones added: “However, there may be tax issues if a property has been occupied for a long term, and expert advice is required to understand the full implications.
“The sale of the property means that any future appreciation in the value of the property is no longer available to the seller, and this may have implications for the value of the company in a future sale of the business.
“It is important to stress that this is not for everyone and professional financial and legal advice is essential in examining whether this is the right route and will work for you and your business.
“However, if you do decide this is the right way ahead and can help your business ride out the current storm, Birmingham is an extremely attractive investment proposition and is very much in the spotlight at present with all the infrastructure and future developments in the pipeline.
“Projects such as the Commonwealth Games and HS2 are focusing attention on the city, and there is an appetite to invest in Birmingham at present that can be to the advantage of all.”
Siddall Jones is one of the region’s leading commercial property agents with offices in Birmingham and Dudley.
For further information, please contact Ed Siddall Jones on 0121 638 0500 or email email@example.com
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For further information, please contact,
Ed Siddall-Jones, Managing Director,
Siddall Jones, The Mint, 95 Icknield Street, Birmingham B18 6 RU.
0121 638 0500
Prepared and issued by Andy Skinner, ASAP PR – 01789 490786, mobile 07990 978257.