Commercial Real Estate Investment Bank Offers Advice on How Corporations Can Use Real Estate to Access Untapped Capital
Beaverton, OR (ContentDesk) June 9, 2005 -- Pacific Security Capital (http://www.pacificsecuritycapital.com), a leading commercial real estate investment bank providing commercial real estate loans, structured finance, investment sales and advisory services shares valuable advice on how corporations can use real estate investments to access untapped capital.Most corporations of any size and scale have large investments in the land and facilities necessary for the successful operation of their business. Mike Myatt, Executive Managing Director of Pacific Security Capital, advises that "while making corporate investments into real estate assets may seem to be a reasonable strategy at first glance, they are rarely investment or capital driven decisions, but rather operating decisions that in retrospect usually fail to maximize the leverage and value of their land and facilities beyond what is typically provided for within traditional ownership and financing structures."????When an operating business finds itself in need of low cost capital their corporate real estate assets should be evaluated as a source of readily accessible quality capital. While a number of financially engineered solutions are available to maximize corporate real estate assets the most commonly used structures center around Sale Leaseback transactions.Sale Leaseback transactions are popular solutions for the following reasons:
Improved Financial Statements: By moving corporate real estate assets "Off-Balance Sheet" financing solutions are engineered that create no mortgage or other indebtedness to be carried as debt on your company's balance sheet. The immediate boost in cash without offsetting debt can improve the overall financial health of a business. Book income typically increases in the transaction's early years, with rent payments less than the interest and depreciation under conventional financing.
With our solutions, the book value of company assets is effectively understated ? enhancing your company's Return on Assets (ROA).????Financial Flexibility: Corporate and commercial real estate transactions are not bound by formalized loan industry or REIT requirements, giving lenders flexibility to meet the operating needs of your business. Rents can be fixed for the full lease term without inflation adjustments or any percentage rent. Rents can also be stepped to be lower in the early years or reset periodically to take advantage of improved credit, interest rates and other conditions. We can also address unexpected financial and business contingencies.????Operational Control:
Most commercial real estate investment banks offer programs that will allow you to retain complete operational control of the property for as long as it is required in your business.
Low After-Tax Cost: The lease payment under a sale leaseback structure is fully deductible over the lease term, making the after-tax cost to your company less than with alternative forms of asset-based financing and less than the market rent you would typically pay.
For federal income tax purposes, a company can only depreciate buildings and other physical improvements, but not land. Most sale leaseback solutions factor the value of the land into the rent. The rent is fully deductible, effectively enabling you to depreciate the cost of the land.
Credit Tenant Property Can Provide Similar Financial Benefits To the Issuance of Corporate Bonds: If a business is deemed to be a credit tenant or its financial equivalent its corporate real estate assets can be effectively be used to secure management-free cash flow with exceptional liquidity and high leveragability performing like corporate bonds while preserving the benefits that real property offers. Because of the secure character of credit tenant property investments, properties can be leveraged far more highly than traditional real estate.
Based on the lease guarantee by the tenant, non-recourse financing may be arranged with a 1.0 debt coverage ratio, allowing for financing Up to 100% loan to value.
Income from an investment grade tenant over the length of a multi-year lease offers reliable returns comparable to those of corporate bonds.
Credit tenant leases are usually written for terms ranging from 10 to 25 years.
Lengthy terms eliminate concern about tenant turnover normally associated with real estate ownership. Near-Zero Volatility: Many of the corporate real estate programs today offer fixed rent structures providing full inflation protection.
Because the key value determinant of credit tenant property is the long-term corporate guarantee, this asset does not experience the cycles affecting other real estate markets.
Long-term, highly leverage financing removes interest rate risk and minimizes pricing volatility.
Circumstances affecting traditional real estate, such as changes to surrounding property, local politics and market swings have little impact on credit tenant property values.????Liquidity: The long-term corporate guarantee of rental income and expense coverage combined with the tenant-based financing enable corporate real estate assets to be traded with exceptional liquidity not typically associated with real property. Most lenders will allow businesses to convert existing fixed real estate assets into cash at fair market value at what may be a premium over book value. Funding can also be used for new construction including the cost of the land acquisition.
Proper use of corporate real estate as a financing tool will eliminate the need for a business to tie up capital or credit in land or buildings. Mr. Myatt shares a final piece of advice: "A wide variety of sale leaseback structures are available from lenders who have a practice area dedicated to corporate real estate finance. When developing your capital formation strategy make sure you evaluate corporate real estate assets as a viable vehicle for accomplishing your goals." Mike Myatt is Executive Managing Director of Pacific Security Capital, a leading commercial real estate investment bank providing commercial real estate loans, structured finance, investment sales and advisory services. Contact Pacific Security Capital at 1-800-844-6085 To learn more about Pacific Security Capital or PacificEliteTM please visit www.PacificSecurityCapital.com or call 1-800-844-6085About Pacific Security Capital Pacific Security Capital is a leading commercial real estate investment bank providing commercial real estate loans, structured finance and advisory services.
The combination of direct lending, investment advisory, intermediary, corporate and professional services, syndication and acquisition services consistently allow PSC to rank among the leaders in the industry. PSC is headquartered in Beaverton, Oregon with other offices in major markets in the United States and the European Community. More information about the company can be found at www.PacificSecurityCapital.com..
Ask Yourself
With the beginning of a new year, are you happy with your life the way it is now?
You just set new goals and resolutions for 2003 but are you satisfied with where you are now?This is a serious question that you need to ask yourself.
You can't get to where you're going if you don't know where you've been.
You need to appreciate what you have now in order to be able to receive more.You want more money to flow into your life but are you grateful for what you have now?
True it may not be as much as you would like to have but doesn't it pay the bills now?
And if not all of the bills, doesn't that money help in some way?Instead of looking at the negative aspects of life - turn them around and find the positive part.
Just like a battery, everything in life has a positive and a negative side.Your outlook on a potentially negative situation can alter your future.
By focusing on the negative parts, say you have an older car in need...
Car loans > Ask Yourself
A Car Resale Value - A Car Buying Guide
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These are tips to maintain the substantial resale value of your new car. Think of it as accepting the fate that your first car buying experience will have to end in a break-up. - Stick with classic colors and options. A neon green car may strike your fancy, even if no one really understands why, but buying a car fit for resale entails sticking to the basics. - Remember that setting up the car's engines, audio and detail accessories...
A Car Resale Value - A Car Buying Guide
Car loans > A Car Resale Value - A Car Buying Guide
Armchair Millionaire Community Bulletin: Keeping the Cash Flowing
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Spending an extra $30, $40, $50 on something you don't need becomes harder when you know you have to write it down at the end of the day. Keeping the receipts makes it a lot easier to return something, to take advantage of rebate offers and to itemize taxes."...
Armchair Millionaire Community Bulletin: Keeping the Cash Flowing
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Hybrid Cars ? Cheap Transportation?
Copyright 2006 Debt Management Credit Counseling Corp.
Maybe you want to do your part for the environment. Perhaps, you want a more economical way to travel since gasoline prices are on the rise. Or, you may want to purchase a vehicle that rewards you with federal tax incentives. Regardless of your reason for purchasing a hybrid vehicle, you need to do research and make sure you get the most out of this financial investment.
There are many websites which help consumers with the process of purchasing a hybrid vehicle.
However, the research itself can still be overwhelming.
Therefore, below are some important aspects you should consider.
Review Review Review
The cost to replace hybrid parts can be extremely expensive.
Reviewing your options when considering these costs, can help you quickly eliminate some hybrids off your list.
Check the Technical Service Bulletins (TSBs) and recalls. Go to edmunds.com...
Car loans > Hybrid Cars ? Cheap Transportation?