The Scenario: Company B owns and occupies an existing retail property. It wants to reduce the debt on its balance sheets and use the cash to reinvest in its core business. The company also wants to enhance its Return on Assets (ROA). With these goals in mind, the company wishes to enter into a sale-leaseback transaction. The Property: A 100,000 square foot stand-alone retail space, constructed in 1993. Original cost and current fair market value: $10 million. Current book value: $9 million. The CRIC Capital Solution: CRIC Capital purchases the property from the company at fair market value: $10 million, even though the book value is only $9 million. The company’s net pre-tax gain of $1 million can be amoritized on the company’s financial statements over the basic lease term. CRIC Capital leases the property back to the company for a basic term of 15 to 25 years, plus one 10-year and four 5-year optional renewal periods. The company has the right to use the property for at least forty-five years. The company has complete control over the use of the property and is responsible for all operating costs, including real estate taxes, utilities, maintenance, and repairs. The rents can be fixed, stepped or periodically reset in a number of ways. The Benefits: The company substantially enhances its financial position going forward and realizes the following benefits: The CRIC Capital Net Lease enables the company to convert into cash valuable capital and credit tied up in real estate. The Capital Solutions Game Plan allows the company to retain complete operational control of the property for as long as it is required in its business. The rent is fully deductible over the lease term, making the after-tax cost to the company less than the cost of alternative forms of asset-based financing and less than the market rent it would typically pay. Back to top