Bass, Berry & Sims attorneys Turner Henderson and Mike Gibson authored an article for Commercial Leasing Law & Strategy sharing key considerations for portfolio architecture and operational flexibility when structuring industrial sale-leasebacks. Sale leasebacks have been a popular approach by many investors in the industrial sector driven by a variety of economic factors.
In the article, the attorneys address four of the most consequential concepts at the heart of negotiating and structuring industrial portfolio sale-leasebacks: master lease versus individual lease architecture, cross-default mechanics, property substitution and lease separation rights and go-dark rights.
The attorneys conclude the article saying, “Industrial portfolio sale-leasebacks are sophisticated transactions where the headline economics (cap rate, rent escalators, lease term) are only part of the story. The provisions governing what happens when the tenant’s business changes over a 20-year lease term are equally consequential, and they are where the transaction is truly negotiated.”
“Understanding these dynamics and building the flexibility framework at the term sheet stage are paramount to ensuring industrial portfolio sale-leasebacks work for both parties in the long term,” said Turner and Mike.
The full article, “Portfolio Architecture and Operational Flexibility in Industrial Sale-Leasebacks: Structuring for the Long Game,” was published May 31 by Commercial Leasing Law & Strategy and is available online (subscription required).