Watch Out for These Sale-Lease Back Challenges

David Swartz

Retail sale-leasebacks are rising in popularity this year. Retailers are looking to unlock capital tied in real estate assets, and are using the structure as a way to optimize their portfolio. However, there are some challenges to watch out for when executing a sale-leaseback strategy, for both brokers and retailers.

To start, brokers need to understand the market and the best assets to sell and those that are essential for the retailer to keep. This requires in-depth market knowledge and research. The challenge on the business end is to understand the tenant’s credit/industry and the underlying value of the real estate,” David Swartz, a partner at Crosbie Gliner Schiffman Southard & Swanson LLP, tells GlobeSt.com. “Well-located property in good markets are obviously much safer and more insulated from down side risk. Also, particularly in the case of a store located within a larger project, careful attention needs to be given to the possibility of something occurring outside the pad owned by the landlord/investor that is outside of its control but which triggers a tenant right or landlord obligation.”