Sale-Leaseback Transactions
Prudent Capital provides capital for sale-leaseback transactions. We look to provide capital to residential, commercial and specialty use rental real estate businesses.
Target Geography
In the US, with a preference for the eastern half of the US
Target Deal Size
$1 million to $25 million per project
Our Deals
Structure - Typical deal structure:
- Property - either just the land or the land and the improvements
- Rate - varies based on property type, location and loan-to-value
- Purchase price - for ground purchases, generally no more than 33% of the overall value of the property; for land and improvements purchases, generally between 85% - 100% of the overall value
- Term - if just the land, then a 99-year ground lease; if the land and improvements, then generally 10-30 years
- Fees - 2% at closing
- Recourse - leases sometimes may be guaranteed by affiliated entities and the individual principals involved in the property
- Expenses - all costs of closing to be paid by property owner (i.e. appraisal, environmental, transfer taxes, legal)
- Subordination of lease - on land only purchases, and construction or renovation of improvements contemplated, the ground lease can be subordinated to a construction loan until stabilization of the property
- Early termination - an early termination of the lease may be negotiated in some instances
- Reserves - rent reserves will be required for the period of subordination of the lease, if any
Investment Criteria
- a strong, experienced, and committed tenant
- a tenant that has a demonstrated track record of success
- a well-located project that has good marketability
- no environmental issues with the project
- if construction, a project with proven demand based on recent comparable projects