Calculator Inputs
Example Data Table
| Scenario | Sale Price | Annual Rent | Cap Rate | Debt Payoff | Lease Term |
|---|---|---|---|---|---|
| Balanced Market | $5,000,000 | $375,000 | 7.50% | $1,800,000 | 15 years |
| Higher Value | $5,600,000 | $392,000 | 7.00% | $1,800,000 | 15 years |
| Higher Rent | $5,000,000 | $425,000 | 8.50% | $1,800,000 | 12 years |
Formula Used
Selling costs = Sale price × Sale cost rate + Other closing costs.
Taxable gain = Sale price - Selling costs - Tax basis.
Tax due = Taxable gain × Tax rate.
Net cash after tax = Sale price - Selling costs - Debt payoff - Tax due.
Annual rent in year n = Initial rent × (1 + Escalation rate)n - 1.
Present value of rent = Annual rent ÷ (1 + Discount rate)n.
Cap rate = First year rent ÷ Sale price.
Rent coverage ratio = EBITDAR ÷ First year rent.
Modeled NPV benefit = Net cash after tax + Present value of reinvestment income - Present value of rent.
How To Use This Calculator
- Enter the estimated sale price for the commercial property.
- Add tax basis, debt payoff, selling costs, and tax rate.
- Enter the first year rent and yearly rent escalation.
- Add the lease term, discount rate, and reinvestment yield.
- Enter EBITDAR or operating income to test rent coverage.
- Press Calculate to view proceeds, rent statistics, and NPV results.
- Use the CSV or PDF button to save the results.
Commercial Sale Leaseback Analysis
A sale leaseback can release capital from owned commercial property. The seller becomes the tenant. The buyer becomes the landlord. This structure can improve liquidity, reduce balance sheet pressure, and keep operations in the same location. Yet the deal also creates a long rent obligation. A careful model should compare cash received today with rent paid over time.
Why This Calculator Helps
This calculator studies both sides of the transaction. It estimates gross sale value, selling costs, debt payoff, taxable gain, taxes, and net cash. It also measures lease payments across the term. Rent may grow every year through an escalation rate. The tool then discounts those future payments back to present value. This gives a clearer view of the economic tradeoff.
Important Statistics
The calculator adds useful statistics for the rent stream. It shows average rent, median rent, minimum rent, maximum rent, standard deviation, and coefficient of variation. These measures help users see how stable or uneven the lease cost is. A higher variation may matter when budgets are tight or revenue is uncertain.
Financial Meaning
The cap rate compares first year rent with the sale price. A lower cap rate usually means a higher property value. A higher cap rate can mean a lower price or higher tenant cost. Rent coverage compares operating income with rent. Strong coverage gives more comfort. Weak coverage may signal pressure after the sale.
Decision Use
Use the results as a planning guide. The best transaction is not always the one with the largest sale price. Taxes, fees, rent growth, lease length, and reinvestment return all change the answer. Export the results and compare several scenarios. Test conservative assumptions before signing any agreement. A professional adviser should review final tax, accounting, and legal impacts before closing.
Scenario Tips
Run at least three cases. Start with expected sale price and market rent. Then test a lower price, higher costs, and faster rent growth. Finally, test a stronger reinvestment return. The spread between these cases shows sensitivity. It can also reveal whether the deal depends on one optimistic assumption.
Keep copies of every scenario. Compare them with lender terms, lease clauses, renewal rights, maintenance duties, and exit choices before final approval.
FAQs
What is a commercial sale leaseback?
It is a transaction where a property owner sells real estate and leases it back from the buyer. The business receives sale proceeds while keeping use of the property under a lease.
Why does cap rate matter?
Cap rate links annual rent to sale price. It helps estimate investor yield and property value. A lower cap rate usually supports a higher sale price, but market risk still matters.
What is net cash after tax?
Net cash after tax is the amount left after selling costs, debt payoff, and estimated taxes. It shows the usable capital released by the sale leaseback.
Why include rent escalation?
Rent escalation models annual rent increases. It gives a better view of long term lease cost than a flat first year rent number alone.
What does rent coverage ratio show?
Rent coverage compares operating income with annual rent. Higher coverage suggests the tenant may handle rent more comfortably. Low coverage may signal lease stress.
What is present value of rent?
Present value converts future rent payments into today’s dollars using a discount rate. It helps compare future lease costs with sale proceeds received now.
Can this replace professional advice?
No. It is a planning tool. A tax adviser, accountant, lender, and attorney should review final assumptions, documents, accounting treatment, and legal obligations.
Why export the results?
Exports help compare scenarios, share assumptions, and keep records. They are useful when reviewing offers, lease terms, lender requirements, and investor proposals.