What is the benefit of an operating lease in Sale Leaseback financing?
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A triple net leasehold obligation that qualifies as an operating lease under the criteria set by the Financial Accounting Standards Board (FASB) will not appear on the tenant’s balance sheet as either debt or a long-term obligation. Therefore, after paying off mortgage obligations and receiving unlocked cash from the sale of the seller/tenant’s depreciated real estate, the seller/tenant will not add a new leasehold debt to their balance sheet. The improved debt-to-equity ratio can make a seller/tenant much more attractive to banks and other traditional lenders.
Tags: leaseback, operating lease, sale and leaseback, Sale-leaseback