Net Lease
Fortress PWS - Introduction to Net Lease Investing
Net Lease
What is a sale-leaseback?
In a sale-leaseback, a company sells and immediately enters into a long-term lease of its real estate with a third-party landlord, such as Fortress. A sale-leaseback provides an alternative to direct ownership of property and allows companies to convert an illiquid asset to cash, which they can utilize for a variety of business uses, while retaining long term use and full operational control of the property.
Potential Benefits of a net lease to investors
Predictable streams of cashflows without the management responsibilities.
Long-term, Known & Predictable Income
Potential for stable income with contractual rent payments
Downside Protection
Protected by real estate in a downside scenario, unlike other fixed income alternatives
Inflation Hedge
Contractual rent escalators built-in to lease agreements and exposure to underlying real estate provide a potential inflation hedge
Real Estate Appreciation
Benefits from potential property upside via improvement in tenant’s credit or general market sentiment
Net Lease Opportunities
~$29 trillion of addressable sale-leaseback assets
We believe that companies may want to enter into a sale-leaseback for a variety of reasons, including potentially unlocking liquidity that is otherwise trapped in non-cash producing real estate, which can be used to further expand and enhance their businesses.
Source: Standard & Poor’s Capital IQ Pro as of March 26, 2024. Based on combined property, plant and equipment value across the US, Canada, and Europe.
Potential Benefits of a Net Lease to Corporations
Free up Liquidity
otherwise trapped in real estate assets
Opportunity to Reinvest Proceeds
towards a variety of business uses
Greater Flexibility
in structuring an arrangement that meets business needs, as compared to traditional financing
Maintain
Operational Control
of the property
Potential Tax
Benefits
where rent payments may benefit from better tax deductibility compared to interest expenses
Long-Term
Financing
may create security and stability