In prior CU Times articles, we have written about the core benefits for credit unions of sale-leasebacks of their owned operating real estate – receipt at closing of the entire profit (the excess of the sale price over depreciated book value), tax-free, which boosts liquidity, current year ROA and permanent capital, all while retaining uninterrupted use and control of the facilities. Traditionally, the financial benefits of the transaction were limited to the credit union itself, by way enhancing its financial condition and ability to grow lending and investments in technology, operations and CUSO-based ancillary business lines. Here, we'll focus on a potential additional benefit of sale-leasebacks – the ability to permit credit union senior management and/or CUSO wealth management clients to share in the financial benefits on the buyer/investor side of the transaction.

Expanding Equity Participation in CU Sale-Leasebacks

In a typical sale-leaseback, the buyer/investor obtains its equity funding from sources unrelated to the seller/tenant. Those equity sources customarily are affluent individuals/family offices and private or public real estate funds with a focus on stabilized office buildings with investment-grade credit tenants. While such traditional investors will remain dominant in the emerging credit union sale leaseback space, there are two additional groups that can under proper conditions also participate as equity investors in such transactions – members of the selling credit union's board of directors/senior management and clients of the selling CU's wealth management CUSO. We consider in turn issues specific to each group.