Mac McCall

MIAMI—Sale-leasebacks aren’t always the best option for corporate real estate owners, but brokers are reporting a steady flow of these deals. What factors are influencing this commercial real estate tactic? caught up with Mac McCall, a managing director at Franklin Street, to get his thoughts on when sale-leasebacks are the right option and what strategies work best in today’s market. If you missed part one of this exclusive interview, you can still read it: Why Sale-Leasebacks Are Still Hot. When are sale-leasebacks the right option? What factors influence this tactic?

McCall: Sale-leasebacks are good options for growing companies that may not be able to tap into the bond markets for cheap debt or access favorable leverage from traditional banks. Also, smaller operators are attracted to the sale-leaseback because they can control the terms of the leases and in many cases can avoid personal guarantees. What strategies work best in today’s market?

McCall: It depends on the situation of a company. If companies are cash heavy they may not need any more money and are happy owning their own real estate. Also, some tenants, like grocery stores, want to remain at a site forever so they elect to own their dirt and never have to worry about their lease expiring. What are the challenges of sale-leasebacks?

McCall: The main challenge is you give up long-term control of the real estate and may create a liability you previously did not have. Do you expect to see more or fewer sale-lease backs in 2014? 

McCall: We expect activity to remain robust in 2014.  As rates go up they become more attractive as cap rates are not moving up fast today because of lack of supply.