Leaseback
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Leaseback property is a type of finance transaction.
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[edit] Leaseback arrangements
After purchasing an asset, the owner enters a long-term agreement by which the property is leased back to the seller, at an agreed-to rate. One reason for a leaseback is to transfer ownership to a holding company while keeping proper track of the ongoing worth and profitability of the asset. Another is for the seller to raise money by offloading a valuable asset to a buyer that is presumably interested in making a long-term secured investment.
[edit] In real estate
Leaseback arrangements are popular in the United States and the United Kingdom. The seller is often a property management company, Typically the initial lease is for 9 to 11 years. The net rental yields are usually in the range 4 to 6% per annum (based on the purchase price). The properties in these arrangements may be residential units, apartment buildings, factories, resorts, or almost any other type of commercial real estate.
Leaseback property has been popular in France for many years and there are significant tax advantages. The French government encourages the development of leaseback schemes in tourist areas to alleviate shortages in rental accommodation. The French government will rebate the local tax, called TVA, when the property is purchased. Currently the TVA rate is 19.6%. In France, a leaseback property typically has to remain in the leaseback scheme for a period of 9-20 years, depending on the specific property and program.
The leaseback concept has spread to other European countries including Spain and Switzerland. Typical property available are studios, apartments and villas. They are situated in ski areas, beach resorts or golf courses.
[edit] Other fields
Leaseback is also commonly used in general aviation, with buyers using the scheme to let flight schools and other FBOs use their aircraft.
