More corporations are turning to sale-leasebacks as an alternative for managing and financing the buildings they occupy.  The upside—from unlocking the full value of the asset in a cash equivalent, to lease structures that qualify as operating leases so the expense stays off the company's balance sheet, to optimizing lease payments to keep rents lower—is too appealing for many corporate real estate users to pass up in the current economy.

Although sale-leasebacks aren't right for every company, billions of dollars worth of sale-leaseback transactions will close in 2014. These strategies may change and challenges are sure to arise, but industry watchers expect to see many corporations explore the possibilities of unlocking real estate value in what is still historically a low-interest rate and low cap rate environment.

“For companies with real assets that are linked to their long-term business strategies a sale-leaseback can provide a source of long-term capital that allows them to redeploy the value of that real estate in their core business,” says Jason Fox, managing director and co-head of Global Investments at W. P. Carey, a REIT specializing in corporate sale-leaseback financing, build-to-suit financing and the acquisition of single-tenant net-lease properties. The company announced record 2013 total investment volume at about $1.8 billion. “By selling a corporate facility to a long-term sale-leaseback investor, a company can retain operating control over the property while accessing the liquidity embedded in the asset.”

Sale-leaseback strategies have been one of the most consistent alternative financing methods in the 21^st century, catching fire during the downturn when traditional financing was hard to come by and staying white hot through the recovery. With cap rates remaining low and interest rates slightly ticking up, the popularity of sale-leasebacks seem to have bona fide staying power.

David Sobelman, an executive vice president in net lease specialist Calkain Cos.' Tampa office, has seen sale-leaseback activity increase in 2013 and 2014. But the motivating factors are different today than they were in 2007-2008. During the downturn, companies were desperate to find cash. Banks stopped lending. Operations percentages were down. Selling the real estate and leasing it back unlocked value that helped some companies survive the storm.

“Today, companies with healthy balance sheets are considering sale-leasebacks—and that's smart because one of the investment criteria is the credit worthiness of the company,” Sobelman says. “The value of the property is much lower when the company's credit is not good. Strong-performing companies are now in a position to truly maximize the value of their real estate—and many are making that decision.”

Strategies still vary depending on the company's unique situation, but there's more competition for quality transactions. And although some industry watchers say sale-leaseback transaction will be flat in 2014, many predict continued momentum this year and in the years ahead, especially if there is a rise in interest rates applicable to corporate credit facilities and if the trend of increased foreign investment in the United States real estate markets continues. 

The future of sale-leasebacks, along with myriad other topics, will be discussed on detail at the RealShare Net Lease conference, to be held at Convene here this week. Join executives from these firms, and others, tomorrow evening for an opening reception, and on Wednesday for a day packed with informative and insightful sessions on the net lease industry.