Do you need to finance a real estate acquisition or construction project? Perhaps your institution requires student housing, a new laboratory, or professional building and yet does not possess the capacity to borrow any more money. Off-balance sheet financing can help you complete your real estate acquisition or construction project with ease by limiting debt on your balance sheet, yet enable you to obtain necessary real estate. To finance your real estate acquisition or construction project, you should consider synthetic leases.
Under a synthetic lease your institution will reap the majority of ownership benefits while listing the financial agreement as an operating lease vs. a long term debt obligation. It is common to use synthetic leases to finance the entire cost of a real estate acquisition when entities are near their borrowing limits. What are the specific advantages of synthetic leases?
The advantages of synthetic leases:
The tenant of the property doesn’t carry the real property debt on any financial statements. This is why it’s called off-balance sheet financing.
The balance sheet does not carry a debt for the acquired real estate. Your institution can effectively increase its borrowing capacity and at the same time avoid having the acquisition interfere with the financial stability of the balance sheet.
Your institution can avoid bankruptcy risk since the lease is not a general obligation debt.
Under the synthetic leases your entire real estate project cost can be covered – acquisition, construction and further development. You can acquire or construct multiple real estate properties under the same synthetic lease. This will help the organization to drive down preliminary project costs.
Bottom line: Your organization will generate more income and improve cash flow rather than accumulate significant debt. You are not required to make payments until the real estate property is completed. The fees your organization collects is used to pay the synthetic lease debt. Under synthetic leases, there is always the option to buy the real estate.
Schedule an appointment with Grant Capital Management to get started on your off-balance sheet real estate project, we can offer financing solutions at competitive market rates today.
Grant Capital Management is a leading provider of capital lease financing to the public sector. We finance almost any type of essential-use capital equipment, real property or Energy Performance Contract. Since 2000, we have funded over $4 billion in lease financings. Grant Capital designs master leases, taxable and tax-exempt lease-purchase agreements and operating leases from $500,000 to $60 million and beyond with terms in excess of 20 years to meet our clients’ specific requirements.
If you need lease-financing services to finance a project, contact Grant Capital Management at 410. 715.9135 or click here today!