The sale leaseback enables a company to tap their real estate assets for capital which can then be used to reduce debt or fund expansion. For example, the New York Times recently sold their new headquarters to WP Casey LLC. Under the terms of the transaction, the real-estate investment firm will pay the sum for the 21 floors occupied by the Times, which then will lease the space back for up to 15 years, with an option to buy it back in 2019 for $250 million. The company will use the proceeds from the sale-leaseback to retire $250 million in notes due in 2010.
Sale leasebacks were popular recently when commercial real estate prices reached all time highs. Proceeds from a sale leaseback can lower a firms cost of capital, and keep a company financially nimble, since leases are not technically a debt obligation.
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