With the coronavirus outbreak well and truly upon us, West Midlands companies strapped for cash are being urged to think outside the box with a radical approach that could save their business.
Birmingham-based commercial property consultancy Siddall Jones has urged businesses who own their premises to consider selling and leasing back their premises as a means to generate cash.
Company Director Edward Siddall-Jones asserts that: “Many businesses are asset rich and cash poor, and the current problems are only going to exacerbate this,”
As a way of alleviating cash-flow problems, the experienced commercial consultant recommends seeking ‘essential’ professional advice should you wish to go down this route.
Edward adds: “There are advantages and disadvantages in sale and leaseback which need to be carefully weighed before a decision is made.”
A sale and leaseback is when a company sells a building it both owns and occupies and enters into a lease agreement with the buyer of the building.
In simple terms, this means, the original owner sells the property to an investor who immediately becomes their landlord.
Elaborating further on the process, Edward explains: “The advantages are that the seller is able to realise some capital immediately and has much-needed cash on tap to see out the next few months.
“The buyer acquires a property along with a long term lease at an attractive yield.”
A sale and leaseback can be done on a wide variety of commercial premises including offices, retail or industrial, as long as there is a single occupier.
Companies with a strong trading history and a healthy balance sheet may receive a better offer of cash from an investor, as will tenants who are willing to enter into leases of at least five years or more at or close to the prevailing market rent.
While the prospect of quick sale and leaseback are desirable to many cash-strapped businesses, Mr Siddall-Jones stresses: “It is important to stress that this is not for everyone and professional financial and legal advice is essential in examining whether this is the right route and will work for you and your business.
“However, if you do decide this is the right way ahead and can help your business ride out the current storm, Birmingham is an extremely attractive investment proposition and is very much in the spotlight at present with all the infrastructure and future developments in the pipeline.
Siddall Jones is one of the region’s leading commercial property agents with offices in Birmingham and Dudley.