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Sale/Leaseback Benefits

1.  Increase LiquidityConvert illiquid equity to cash, while retaining control of the underlying property by virtue of the leaseback.

2. Hedge Downside RiskConvert present equity to cash, thereby eliminating any exposure that the underlying property may decrease in value in the future.

3.  Off-Balance Sheet Liability(a) No longer need to carry an illiquid asset on their balance sheet at a below market value and/or (b) pay down debt.

4Retain DepreciationDepreciate leasehold interest if the parties sign a lease with a term greater than 30 years (including lease renewal options).

5.  “Depreciate” LandUnlike conventional real estate ownership where the land component of a property would not be depreciable, the seller would be able to deduct the lease payment attributable to such land value.

6.  Raise Additional Investment Capital –  Maximize financial returns by redeploying net cash proceeds to:

a)  Resolving other working capital shortfalls,
b)  Facilitating debt restructurings, and/or
c)  Redeploy net cash proceeds elsewhere at higher rates of return.

7Strategically Recognize Taxable Gains and LossesTime the recognition of gains (e.g. to offset net operating loss carryovers) or losses (to reduce tax liability on other taxable income), while retaining control of the underlying property.

8Alternative to Mezzanine Financing – By selling property at its fair market value, a property owner can achieve a higher advance rate than mezzanine financing with:

a)  Substantially lower capital costs,
b)  No loan origination fees,
c)   Lower loan constants,
d)  No short term balloon payments,and
e)  No restrictive debt covenants.