FAQs


1. Why lease versus own?

In general, a company's investment in core or new business operations produces higher returns on assets and capital than investing in its own real estate. A company that keeps its own capital invested in real estate is effectively diverting funds from its primary business. A company typically is better off occupying those core assets under long-term net leases, reinvesting the freed-up cash in its core business and leaving the risk of real estate to others whose business is efficiently owning and financing real estate.

As a result of our geographic coverage, our development expertise, and capital relationships, we are able to execute development opportunities in a single market or across the country. We combine an entrepreneurial and innovative mindset to deliver superior economic results for our clients time after time. Our focused approach allows you to devote your time, energy, and resources where it belongs: on your business.

2. How do net lease transactions work?

Collins Real Estate Advisors develops new properties or purchases existing properties from owner-occupants and simultaneously leases them back to the seller. The lessee preserves operational control of the property and benefits from the immediate cash proceeds, which can be used without restriction for any other purposes.

For assets owned by third parties, Collins Real Estate Advisors can buy the asset (or fund its construction), subject to a long-term lease to the ultimate tenant.

3. What are the specific benefits of a long-term net lease?

By entering into a long-term net lease, a corporation can accomplish the following:

  • Convert a non-earning asset to 100% unrestricted cash
    Achieve fixed occupancy costs below its weighted average cost of capital
  • Keep the asset off-balance sheet
  • Enjoy ownership-type flexibility and control over the real estate, for up to 40 years
  • Off-load real estate risk through the right to walk away at the end of the lease

4. How does leasing improve a company's access to capital markets?
Net leasing allows a company to diversify funding away from bank lines and other traditional capital sources, as well as to match long-term real estate assets with long-term, fixed-rate lease obligations. The net lease provides a company with access to long-term capital for 15 years or longer. Improved financial ratios through moving assets off-balance sheet will also enhance access to capital.

5. Is a company's operational flexibility limited by leasing properties?
A net lease offers the high level of operational flexibility that companies require, such as alteration rights, rights of assignment and subletting, as well as long-term options for renewal.

6. What is the difference between a net lease transaction and a sale-leaseback transaction?
The only distinction relates to the ownership of the property immediately prior to the transaction.

In the case of the net lease transaction, the lessee does not own the property before entering into the lease. The lessor buys the property from a third party and net leases it to the lessee.

In a sale-leaseback transaction, the lessee owns the property immediately prior to the transaction, sells the property to the lessor, and simultaneously leases it back from the lessor. For FASB accounting purposes, the lessee in a sale-leaseback cannot have a "continuing involvement" in the property. A continuing involvement includes an option by the lessee to purchase the property at any price (including fair market value) or a residual interest in the property. However, the lessee may have long-term renewal options.