SIOR Professional Report: When It Comes to Financing, Everything Old Is New Again

Do you remember master leases? How about sale-leasebacks? If you do, it may be time to dust off some of those old strategies. In this economy, you have to search for ways to make financing work. If you don’t remember the old strategies, it may be time to learn.

“Recently, a buyer said they would lease a property from the seller and spend money to improve the property in order to have more equity when they closed,” says Matthew G. Cravey, SIOR, CCIM, RECS, of NAI Cravey Real Estate Services in Corpus Christi, Texas. “The seller was so happy to see some cash flow come in and service his debt that it sounded like a great deal to him. That’s old school (what we used to do in the ’70s); we had owner financing and master leases.”

During that time, he recalls, the master lease was very common. “They’d master lease the whole property and pay one rent. The seller would still own the property, and the buyer would get any cash flow over what the seller needed for expenses, and would fix up the property,” he explains. “That’s how Conrad Hilton built his company.”

Reprinted with permission from the Society of Industrial and Office Realtors.

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