Community Chat

[SeaMaiden]

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@SharkE wrote:

Hope they don't go under till I get all my orders.

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@SharkE  😄😄😄😄😄😄

[Mj12]

So many companies do this (FedEx, Taco Bell, Bed Bath Beyond, a lot of chain restaurants, banks, the federal government) - for example a 30 year lease back and at the end of the 30 years they get ownership of a property back (while someone else in the meantime paid for improvements, maintenance, etc.). Whether QVC is in trouble or not I have no clue but many companies do this to improve their balance sheet and minimize risk.  

[chrystaltree]

It's a way to bring in quick cash. The hospital I worked for did that about 10 years ago. It's a  world ffamous wealthy hospital but insurance payments were significantly down, expenses were up and they didn't want to touch their reserves. They sold a bunch of buildings and a parking garage for many millions of dollars and took out extremely  long term leases for the space.  Those of us on the finance side knew but people who worked the clinical side never knew because nothing changed for them.  They never thought about who owned the buildings they worked in.

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[chrystaltree]

@santorini wrote:

Wow. What could this mean? Are they that broke that they needed fast cash?

         They aren't broke in the way that we think of broke. The paychecks aren't going to bounce. But they do need an infusion of cash...now.

[depglass]

There is one thing I remember from my college economics class.  Price is determined by the law of supply and demand.  Less supply, as is the situation now, prices go up.  Once more goods are available and/or demand goes down because people won't buy at that level, prices go down.  

[depglass]

I can't follow the steps but this sounds like one massive tax reduction mechanism to me.

[hckynutjohn]

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@Icegoddess wrote:

I shop more at HSN, but all this comfy cozy stuff is getting really old for me.  That, and every time I do actually turn QVC on, they're spending another hour on the

TSV. 

@Icegoddess 

I use my DVR. Watch only what I choose.

hckynut  🇺🇸

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[newjersey]

I'm sorry, but don't understand.   What does this mean for qvc as a company?

[gertrudecloset]

Sale-Leaseback of Commercial Real Estate: Pros and Cons

This article discusses some of the advantages and disadvantages of a commercial real estate sale-leaseback transaction with respect to both the seller and the purchaser.

A “sale-leaseback” is a transaction whereby the owner of a property enters into an agreement or simultaneous agreements to (1) sell the property to a buyer and (2) lease the property from the buyer for a designated period.

For commercial sale-leaseback transactions, the property typically involved is a commercial building, e.g., a warehouse, but could also be for the land itself. The lease is usually a “triple net lease,” meaning the seller-tenant agrees to pay all real estate taxes, maintenance, and building insurance on the property in addition to any other costs (e.g., utilities) that are designated under the lease.

There are two parties to a commercial sale-leaseback transaction who assume four different roles: the (1) seller and (2) buyer, who become, respectively, the (3) tenant and (4) landlord. Each role comes with various advantages and disadvantages that should be considered before negotiating and entering into a sale-leaseback transaction.

A. Seller-Tenant. One of a seller-tenant’s primary advantages to a sale-leaseback transaction is the ability to remove whatever remaining debt that was encumbering the property from its books, while simultaneously liquidating whatever equity it had obtained in the property. The result of the transaction is that the property will no longer be carried by the seller as an asset at cost, but as an operating lease. Because the property’s purchase price will be higher than the remaining previous financing in most circumstances, the seller’s debt to equity ratio will be reduced. In short, a sale-leaseback transaction allows the seller to choose when it wants to reap the monetary benefits of any increased equity in the property while continuing to operate within the facility, instead of waiting to sell until the property is no longer needed.

Another advantage for a seller-tenant is the ability to maintain possession and effective control of the property without tying up financial resources. Although the seller-tenant will not be the actual owner of the property after the transaction, it will be able to negotiate the length of the lease, affordable payment terms, and other contractual conditions that are appropriate for future operations in the property.

A third advantage for a seller-tenant is the potential to benefit from certain tax considerations. If the subject property has been fully depreciated, the seller-tenant—had it kept the property—would not be able to use depreciation as a tax deduction in future filings. However, upon sale, the seller-tenant’s overall bottom line would likely increase as the lease payments would be deductible at the property’s current basis.

Buyer-Landlord. One advantage of a sale-leaseback transaction for a buyer-landlord is the opportunity to obtain a specified return on investment (ROI) with relatively low risk. By properly structuring the lease, the buyer-landlord will be able to earn a set ROI for the life of the lease. The main risk for a buyer-landlord is the viability of the seller-tenant. If the seller-tenant defaults, then restructuring the lease or ending the relationship entirely is likely. However, this risk is involved in any leasing transaction, and the buyer-landlord can gauge the likelihood of default before executing the transaction.

Another advantage for a buyer-landlord is the ability to contract out of several other risk areas through the use of a triple-net-lease. Through this customary type of lease, the seller-tenant bears the financial responsibility for taxes, maintenance, and property insurance.

A further advantage for a buyer-landlord is the protection it has from market swings. If the fair rental value for commercial real estate decreases, the seller-tenant will still be obligated to pay the contractual rental amount. Thus, a sale-leaseback transaction is effectively a hedge for a buyer-landlord because if the real estate market appreciates, the buyer-landlord will be unable to recognize that increase until the lease comes to term, but if the rental market depreciates, the seller-tenant is locked into the higher rental rate from the lease.

Other possible advantages to a buyer-landlord include tax benefits from depreciation and investment tax credits, if available. Depreciation of the property and investment tax credits will help offset some of the gains the buyer-landlord will earn through rental income.

Finally, if the seller-tenant provides purchase money as tender for the transaction, the buyer-landlord has more flexibility than a mortgage holder in similar situations. The buyer-landlord can simply evict the seller-tenant and take control of the property pursuant to the lease, which is less convoluted than mortgage foreclosure.

https://www.investopedia.com/terms/l/leaseback.asp

[gertrudecloset]

No one knows.  That's why it's important to get on board with the changing face of the consumer.  If you wait too long because of subborness, then you shall reap what you sew in the business world.