Optimizing Sale Leaseback to recapitalize Tenant

16715 Hymus Blvd is a prestige office and industrial facility located in close proximity to Montreal-Trudeau airport and 25 minutes to downtown Montreal; built new in 2004 consisting of +/- 21,000 SF of office space and +/- 45,000 SF of fully air conditioned & temperature-controlled warehouse. The Tenant had spent over 1.3M dollars in 2018 on mission critical utility. Tenant capital improvements included: new 2nd floor state of art offices, HVAC (2), increase of parking area to 143 spots with Attractive 28’ Foot Clear Height “White” quality warehouse & assembly space.

The Challenge

• Tenant had allocated significant capital to purchase of land included with corporate acquisition.
• In combination with the capital improvements – over invested in real estate – effectively tying up significant working capital constraining the business.
• As public company needed to create accretive structure to avoid any negative impact on earnings and covenants.

Actions Taken And The Results

• Restructured lease elements and financing to mitigate tax impact for Target and optimize accretive aspects on sale leaseback.
• Worked with municipality to optimize value of location and secured its value in industrial park and employee access.
• Currently active investment – annual distributions 6% cash on cash to date with 100% tax shield.
• Estimated IRR of project 12-15%.