Can a business get a Commercial Real Estate Leaseback in this market with current real estate values? Yes, Commercial Real Estate Leasebacks are happening. Full appraisals, additional scrutiny of cash flows through the review of 2 to 3 years of tax returns, bank statements, rent rolls if not owner occupied, and lower LTV’s, and more may well be required in the current environment. The lower LTV on a commercial real estate leaseback is a big issue.
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The lender wants to protect themselves in a sinking market by lowering the LTV’s. Instead of 60%, 70%, or 80% LTV’s, 40% – 60% LTV’s may be in order. After a sound cash flow situation of the borrower is verified, the lower loan to value will primarily protect the lender in this environment. This is to be expected to continue throughout 2011 and 2012.
After the full appraisal is completed, if the value is sufficient and credit is acceptable, the lender will do an environmental survey. Upon passing the survey, the lender is ready to proceed with a Commercial Real Estate Leaseback.
Commercial Real Estate Leaseback Resources:
Realtor.org – Provides important sales and statistical real estate information