How do you conduct a sale-leaseback transaction for real estate?

TRANSACTING SALE-LEASEBACKS FOR NET LEASE REAL ESTATE

Nothing But Net episode image displaying a diagram of how capital changes hands through a sale-leaseback transaction. The Buyer/Investor of a triple net lease property becomes the landlord of the property upon sale and receives rent payments from the seller, who is now the tenant that uses the capital from the sales proceeds to fund capital improvements of the property and is set into a long-term lease. Also featured is NNN guest Chris Drzyzga of Voit Real Estate Services who explains sale-leaseback transactions in depth during the episode.

In this episode, hosts Adam Carswell and Michael Flight are joined by Christopher Drzyzga, Vice President at Voit Real Estate Services, to discuss how sale-leaseback transactions work to benefit both the buyers and sellers of Triple Net real estate. Chris delves into the important aspects of facilitating sale-leaseback transactions and how they can suit real estate investors better than the typical sale of a property, especially with medtail and last-mile distribution facilities. Michael, Adam and Chris also expand on the advantages of this type of real estate transaction, including acquiring a fully leased asset from the first day of the lease term, capital improvement of the property from the tenant’s commitment to its upkeep, and Cap Rate Compression circumstances. The men also explain the benefits of having skilled brokers to help investors properly transact with a sale-leaseback, like utilizing the unique tax benefits. Closing the show, Chris, Adam and Michael share the crucial factor of choosing a great property to perform a sale-leaseback transaction.

Michael and Adam would like to give a huge thanks to Chris for sharing his knowledge and experience with the Nothing But Net community.

Chris Drzyzga, Commercial Real Estate Broker

Website

Chris is a Vice President in Voit’s Irvine office. He has a wide range of experience in all property classes and transaction types; which includes leasing on behalf of landlords and tenants, purchase and sales, ground-up development and redevelopment. Chris specializes in representing tenants, landlords, business owners, and investors throughout Southern California in office, medical office, and industrial property transactions; He has personally completed over 200 transactions and has been involved in over $300 Million in total consideration for transactions throughout the Western United States. His responsibilities include but are not limited to local market expertise, business development, short & long-term planning, financial analysis, and transaction management. He is a go-getter; his drive, work-ethic, attention to detail and superior customer service enables his success in everything he pursues. Chris, a Las Vegas, NV native has resided in Southern California since 2008. He graduated from Loyola Marymount University, Los Angeles with a Bachelor of Arts degree in Business Administration with an emphasis in Finance. His favorite hobbies include music/concerts, athletics, trying different cuisines, reading, and traveling.

Timestamped Shownotes:

01:41 – Host Adam Carswell and co-host Michael Flight, CEO and co-founder of Liberty Real Estate LLC (Liberty), introduce special guest Christopher Drzyzga, Vice President at Voit Real Estate Services

05:22 – What does Voit Real Estate Services specialize in?

06:40 – What are the benefits of California’s industrial real estate market for investors?

07:58 – What are the most popular types of industrial real estate in California?

09:25 – How can companies convert vacant retail shopping centers into last-mile industrial properties?

10:42 – What is a sale-leaseback transaction?

11:49 – Why would investors want to do a sale-leaseback instead of owning the real estate?

14:13 – What are the tax benefits of doing a sale-leaseback transaction?

16:20 – What is the biggest obstacle to sale-leaseback deals?

17:27 – Why is a sale-leaseback transaction advantageous given Cap Rate Compression?

18:12 – What are the benefits for investors transacting with a sale-leaseback?

19:34 – What types of investors are conducting sale-leaseback deals?

20:53 – What factors are important to consider for setting a market rental rate on sale-leaseback real estate?

22:11 – What are the advantages of having your own broker and what should they know about the real estate market?

23:05 – What types of real estate properties most commonly have sale-leaseback deals?

24:31 – Why is situational awareness of your specific real estate market key to finding great sale-leaseback opportunities?

27:32 – What is an installment sale, also known as seller financing?

28:53 – What is the key component of doing a sale-leaseback transaction on a real estate property?

30:53 – What experience does Chris have conducting 1031 exchanges in real estate transactions?

Key Points:

1. A Sale-Leaseback gives the investor a fully leased asset from the start of the deal and the seller, who turns into the tenant, capital to expand or improve the property.

2. Sale-Leaseback transactions are tax-efficient investments with tenants committed to maintaining the real estate.

3. The property being sold during an installment sale, or seller financing, has to have little to no debt.

4. Situational awareness of your real estate niche is important to finding quality properties for sale-leaseback transactions, which means having market experts and a skilled broker is crucial.

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