---
title: Short-Term Sale Leasebacks Serve Niche Needs
description: Short-term sale leasebacks can provide benefits for both buyers and sellers, allowing sellers to maximize profits and buyers to secure a stabilized revenue stream. This blog explores how short-term lease terms can serve niche needs in the commercial real estate market.
image: https://ascensionadvisory.com/hubfs/1000%20x%20500%20(5).webp
---

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# Short-Term Sale Leasebacks Serve Niche Needs

 Mar 01, 2023

![ Short Term Sale ](https://ascensionadvisory.com/hs-fs/hubfs/1000%20x%20500%20(5).webp?width=1000&height=500&name=1000%20x%20500%20(5).webp)

Our previous columns have explored a range of sale leaseback strategies that owners can use to take their business to the next level. We’ve shown how accessing the equity in owned real estate can provide low-cost capital to fortify the balance sheet, add a production line, upgrade equipment, purchase or develop a new store or distribution center, or even acquire a rival company. A sale leaseback can be the enabling transaction that makes these or other business objectives attainable.

Growth isn’t always the goal, however. An owner may plan to close a secondary manufacturing operation at the end of a contract period, for example, and then sell the property. Alternatively, the plan may be to sell the business to a competitor that will absorb the operation without need of the acquired company’s real estate. Perhaps the business is simply moving to another market and leaving behind an empty space that will need to be sold.

The common thread in these situations is a ticking clock on the real estate’s current occupancy. This prevents the business from committing to a lengthy lease term at the property, depriving a buyer of the assured rent stream that typically draws sale leaseback investors to an offering.  
Buyers and sellers can still enjoy several sale leaseback benefits with a lease term of only a year, two years, or whatever length best serves them. Sellers, in particular, stand to maximize potential profits by separating the property sale from the sale or dissolution of the business.

**Short and sweet**

In the commercial real estate market, asset prices generally reflect the net income a property is producing or likely to produce from rent, less the owner’s debt service and any expenses not paid by the tenant. Investors will expect to pay less for vacant buildings because they will lose out on rental income until they fill the space. In the meantime, the buyer may need to market the space or pay for tenant improvements before it is leased. A similar property that is fully leased will sell for a higher price because the buyer is stepping into a stabilized revenue stream.

Business owners who expect to vacate and sell real estate in the near future can mitigate the vacancy effect on pricing by selling the property early on and then leasing it back while they wind down the operation. Advantages to the seller include access to sale proceeds months or years before the onsite operation shuts down. The seller may even use cash from the sale to acquire or construct new digs for a relocation.

The seller also avoids bringing an empty building to market and instead offers potential buyers an immediate return in the form of rent payments under a short-term lease. Buyers are more likely to pay top dollar for the property knowing they will have a set number of years to recruit a new tenant, and will regularly collect rent in the interim.

Similarly, the seller can use the lease term to plan and arrange their next move, whether that is to sell the business, relocate, or wind down the operation and liquidate equipment and other assets before the lease ends. If their end game is to sell the business, a completed sale leaseback can sweeten the offering by removing real estate that many buyers would consider a liability in an acquisition target.

Negotiating one or more renewal options can provide even more flexibility, just in case the operator isn’t ready to make a move when the initial term ends.

We would love an opportunity to learn about your business goals, and to explore ways we can put your real estate to work in achieving those objectives. Please contact us for a consultation.

 

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