Sale and leasebackcapital from your own business property

How it works

1. The company sells its business premises to an investor.
2. At the same time, a long-term lease is signed – usually for 10 to 15 years.
3. The company continues to use the property as before and receives the purchase price as liquidity.

Reasons for a sale and leaseback

• Financing growth: machinery, digitalisation, expansion – without additional bank loans.
• Business succession: the successor takes over the business, the property goes to an investor; the senior owner receives the purchase price.
• Strengthening the balance sheet: reducing debt, improving the equity ratio.
• Focusing on the core business: property risks pass to a specialised owner.

What the investor pays

For the investor, the property is an income-producing asset. The purchase price results from the agreed rent and the yield the investor requires for the risk. Decisive factors:

• The company's creditworthiness – the better it is, the lower the required yield and the higher the purchase price.
• The lease term – long terms increase the value.
• The rent level – a higher rent increases the purchase price, but places a permanent burden on earnings. It should be based on the market rent.
• Alternative use potential – the more easily the property can later be let to other users, the more attractive it is to investors.

Structuring the lease

• Term and extension options
• Rent indexation
• Allocation of maintenance (structural repairs, "Dach und Fach", with the landlord or tenant)
• Rights to extend and convert
• Pre-emption or buy-back rights for the company

Tax and balance sheet

On the sale, hidden reserves are realised and taxed. Under certain conditions they can be transferred to new investments (§ 6b EStG). On the balance sheet, the property is derecognised; under international standards (IFRS 16), a right-of-use asset may have to be recognised. Involve your tax adviser and auditor at an early stage.

The process with FrankenImmo

1. Analysis: property, market rent, investor market, target purchase price.
2. Structuring: key lease terms in consultation with your advisers.
3. Approaching investors: discreetly, after a confidentiality agreement, to selected investors from our network.
4. Negotiation and due diligence: data room, expert reports, lease.
5. Notary and closing: the purchase contract and lease take effect at the same time.

Worked example: production hall in the district of Hof

A mechanical engineering company with 85 employees owns its hall with an office wing (4,200 m²). Book value on the balance sheet: €900,000. The company needs capital for new production equipment.

This is offset by a permanent rent burden of just under €16,000 a month. Whether it pays off depends on the return the company earns in its core business with the released capital. The land transfer tax (Grunderwerbsteuer) of 3.5% is usually paid by the investor.

Sale and leaseback or bank loan?

For many companies a combination makes sense: selling part of the property portfolio while keeping specialised space essential to operations. Development banks such as LfA Förderbank Bayern also offer alternatives for financing mid-sized companies.

An honest look at the risks

• Permanent fixed costs: the rent is due in good years and bad. A rent set too high – to push up the purchase price – takes its revenge in times of crisis.
• Indexation: the rent rises with inflation. Agree partial indexation or a cap.
• Loss of value growth: if the value of the site rises, the investor benefits.
• Expansion: if the company grows, it needs the owner's consent for extensions. Extension rights therefore belong in the contract.
• Buy-back: a later buy-back is usually more expensive than the sale price.

Business succession in Oberfranken

Oberfranken has a strong, often family-run Mittelstand – from mechanical engineering, plastics and automotive suppliers to the porcelain and textile industries. Many businesses face a succession in the coming years. A sale and leaseback can solve several problems at once here:

1. The successor does not have to finance the property as well and can concentrate on the purchase price for the operating business.
2. The senior owner receives part of their retirement provision from the property sale.
3. The site and the jobs remain secure.

Alternatively, the property can stay in family ownership and be let to the successor – that is a question of overall planning with your tax adviser and notary. More on valuation under Valuing commercial property.

What investors examine

We prepare these documents in a confidential data room and approach investors who match the size and sector – see Investor matching, Warehouse and industrial space and Selling commercial property.

Negotiating the lease properly

In a sale and leaseback, the lease is more important than the purchase contract – it determines the next ten to twenty years. You should negotiate these points with your advisers particularly carefully:

Tip: an excessively high rent may increase the purchase price in the short term, but it weighs on every financial year. Investors also assess the risk that an overpriced lease will not be renewed when it expires. A market-level rent is more sustainable for both sides.

Balance sheet and key figures: what changes

Under the German Commercial Code (Handelsgesetzbuch, HGB), the property disappears from the balance sheet; the rent payments appear as an expense in the profit and loss account. This usually improves the equity ratio, because debt is reduced, and increases liquidity.

Companies that report under international standards (IFRS 16), by contrast, show a right-of-use asset and a lease liability. The balance sheet effect is smaller there. For banks and rating agencies, how cash flow changes also matters: interest and repayment turn into a permanent rent.

Consider the alternatives

A sale and leaseback is not the best solution for every company. Compare at least:

1. Conventional refinancing of the property with your main bank.
2. Subsidised loans, for instance from LfA Förderbank Bayern, for investment in mid-sized companies.
3. Selling space not needed for operations, such as an empty hall or part of a plot. → Selling a plot
4. Bringing in a partner or equity capital.

We would be happy to prepare a comparison with realistic figures for your property – confidentially and without obligation. Get in touch via Book an appointment.

Sale and leaseback for practices and the self-employed

It is not only industrial companies that use the model. Doctors, dentists or vets with their own practice building can also release capital – for new equipment, a partner's exit or retirement provision, for example. Investors value practice properties because of the usually long tenancy. What matters here is a provision for the case that the practice is handed over to a successor. → Office and practice space