In today's higher interest rate costs, for the first time in many years, there's a condition where the financing alternative of sale-leaseback is superior to the borrowing options that a company might have, according to Alan Pontius at Marcus & Millichap.
The firm's senior vice president and national director of industrial, and healthcare divisions, speaking on a company news video, said the borrowing rate for the leaseback, or the cap rate, is many times less than the corporate borrowing rate, or the business borrowing rate, for the enterprise.
In other words, if the borrowing rate is 10%, but the owner could sell the building and lease it back at 8%, that's a 200-basis point spread, and obviously a much more beneficial financing mechanism for the business than borrowing against their balance sheet, according to Pontius.
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