Sale & Leaseback operations

The "Sale and Leaseback" operation is a strategy in which a company sells an asset (i.e., a property) to another company and then leases that same asset back on a long-term basis. This can provide a source of financing and can also allow the company that sold the asset to free up capital for other purposes.

In terms of energy cost savings, this can depend on several factors, such as the type of property being sold and leased, energy market conditions, and the contractual obligations of the lease agreement. If, for example, the property in question is a commercial building that consumes a significant amount of energy, the company buying it and leasing it back may have incentives to make energy efficiency improvements to the building to reduce energy costs.

There are many ways to save energy in an asset, which can help reduce costs and environmental impact. Here are some possible ways:

• Insulate the building: Insulating the walls, roof, and windows can help retain heat in the winter and keep cool air in during the summer. This can reduce the need for heating and cooling, and ultimately lower energy consumption.
• Install energy-efficient lighting: Replacing traditional incandescent bulbs with LED or CFL bulbs can significantly reduce energy usage. These types of bulbs use less electricity and last longer than traditional bulbs.
• Use smart thermostats: Installing smart thermostats can help regulate the temperature in a building based on occupancy and can adjust heating or cooling when no one is present. This can lead to significant energy savings over time.
• Use energy-efficient appliances: Installing appliances with the Energy Star label can help reduce energy usage. These appliances are designed to use less electricity and water than standard models.
• Install solar panels: Installing solar panels can help generate renewable energy and reduce dependence on grid power, which can lead to savings on electricity bills. Additionally there can be important tax incentives.
• Use natural light: Designing the building to use natural light instead of artificial light can help reduce energy usage during daylight hours.
• Implement energy management systems: Using an energy management system can help monitor and control energy usage in real-time. This can help identify areas of inefficiency and adjust accordingly.

By implementing these and other energy-saving measures, you can help reduce energy usage in an asset and achieve cost savings while also promoting environmental sustainability.

However, it is important to keep in mind that energy cost savings are not necessarily a guarantee in a sale and lease back transaction. The decision to use this strategy should be based on a careful assessment of the long-term costs and benefits, and other important factors such as the impact on the company's financial situation and long-term flexibility should be considered.

At VMT & Associates we have seen the important increase in Sale & Leaseback operations as the benefits are clear for all parties involved. An in-depth technical consultancy of the asset and operation are key to truly take advantage, both technically and legally, of this type of real estate transaction.

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