Are Sale-Leaseback Benefits Better for Credit Unions? Yes – Here’s Why

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The sale-leaseback business has certainly evolved since the first transaction in the 1950s, however the major benefits for the seller/lessee still remain today. Roughly 60% of corporate real estate in the United States is leased (versus owned), typically for reasons such as tax and accounting advantages, operational flexibility and a lower cost of capital. While credit unions can benefit from all of the aforementioned items, there is one major advantage that is specific to the credit union industry.

By accessing cash tied up in the brick and mortar, the seller/lessee can use that additional capital to invest in member services, technology upgrades, loans or other growth initiatives. The proceeds can also improve a credit union’s balance sheet by providing additional liquidity while maintaining capital ratios. A properly structured sale-leaseback provides the seller a pool of capital at 100% of the fair market value for their real estate without having to go to the debt market. New debt means a lower loan to value with new liabilities and worsening capital ratios on the balance sheet.