MIAMI—What are the challenges ofsale-leasebacks? That may depend on whom you ask.Brokers have one perspective and attorneys have another.


We caught up with Joseph M. Marger, a partnerat the law firm Reed Smith, to get his perspectivein part two of this exclusive interview. You can still read partone: Unlocking Trapped Real Estate Value.

| When are sale-leasebacks the rightoption? What factors influence this tactic?


Marger: Sale-leasebacks aregreat if a company has value locked up in a piece of real estatethat it wants to fully monetize but needs to keep the location forit operations. Companies with a good management team and growthpotential may see the value of their real estateenhanced in the sale-leaseback world since theselenders consider more factors than just “bricks and mortar”value.

| What are the challenges ofsale-leasebacks?


Marger: Tenants have to be willing to cede somecontrol over what can be done at the property without consent ofthe sale-leaseback finance company—but this is no different thanwhat would happen with a mortgage loan). However,sale-leaseback finance companies tend to belong-term holders and relationship driven, so they are often moreresponsive to tenant needs than lenders, particularly servicers inthe CMBS market. Also, the tenant needs to bewilling to part with the property at the end of the term—but manytenants secure FMV repurchase options to keep ultimate control ofthe asset.

| Do you expect to see more or fewersale-lease backs in 2014?


Marger: More, if corporate borrowing ratescontinue to move up.

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