Services

Garabedian Realty Advisors specializes in two types of real estate.  Single Tenant Net Leased and Sale-Leaseback.

STNL

Single Tenant Net Leased (STNL) property is the best way to own a management-free investment in real estate.  These types of investments are typically long term (15-25 years) and as the name implies are net leased, meaning that there are no landlord responsibility (absolute or bondable).  In many cases they are credit tenant leased (CTL).  When placing a loan on a CTL deal, the better the credit the higher loan to value (LTV) an investor can achieve with a lower interest rate (based on points over 10 year US treasuries or Canada Bonds).  GRA specializes in STNL and CTL in the United States and Canada .  THAT'S ALL WE DO.  When you do something long enough you get pretty knowledgeable and street smart (not just book smart).

Sale-leaseback

Sale-leaseback (SLB) is the best way for a corporation to take full advantage of the underlying value of their real estate.  In many ways the SLB allows a corporation to retain control and use of their real estate and to utilize 100% of the cash generated by the transaction.  By establishing a long term operating lease they can take the real estate liability off balance sheet and replace it with a tax deductible operating lease.  They can then take the cash derived from the transaction and pay down debt or redeploy in existing or new operations.  As far as the investor is concerned it is a single tenant net leased property acquisition with a tenant already in place with a long term lease.  No leasing commissions, no vacancy risk upon acquisition.

More on Sale-Leaseback

For decades owner/users have used sale leaseback transactions to free up capital invested in real estate and convert it to alternative uses, primarily in their business.

Property types that lend themselves to sale leaseback are

• Freestanding single occupant buildings that may be industrial warehouse/distribution
• Research and development facilities
• Corporate offices, and
• Most types of retail

Governmental entities have even investigated the possibility of sale leasebacks for some of their facilities.

Advantages of the Sale Leaseback A sale leaseback transaction can offer an attractive alternative to placing debt on the real estate to raise capital. Any debt placed on the real estate is listed as a primary liability on the balance sheet. However, the lease from the sale leaseback - if structured properly - is noted as a footnote on the balance sheet instead of a primary liability.

Quite often, if the facility has been owned for a reasonably long period of time, the balance sheet can be improved. An asset at current book value is removed from the balance sheet and replaced by the cash that is raised from the sale leaseback. The cash raised from the sale leaseback is often greater than the book value of the asset being sold.

From the investor's perspective the sale leaseback transaction creates an investment with a tenant already in place and operating a business. Most leases involved in the sale leaseback transaction are absolute net, thereby eliminating most of the property management problems for the investor.



Benefits to the User/Seller
The sale leaseback transaction offers the following potential benefits to users/sellers:

Converts a non-liquid real estate asset to cash -- which is a very liquid asset -- while retaining control and utilization of the property. Moves a capital asset at book value from the balance sheet and replaces it with cash received from the sale. The lease, if structured properly, goes onto the balance sheet as a footnote and not a primary liability. Avoids the cost of conventional debt financing or refinancing associated with encumbering the property with debt financing. Debt financing also goes on the balance sheet as a primary liability. Allows the user to effectively depreciate the land as the lease payments cover the use of the land and the building. The lease payments are tax deductible. Offers an ownership exit strategy for a user who might not otherwise be able to readily sell the real estate.

Benefits to the Investor
The sale leaseback transaction offers the following potential benefits to investors:

Secure a stable, long-term income stream Acquire an investment with relatively low management intensity Provides a tenant that is already sold on the location and the property Provides the potential for appreciation in value Depending on the lease terms, can be a hedge against inflation Deductibility for tax purposes of cost recovery and also interest if debt financing is used