Commercial Distressed sale- lease backs

[Bill Gulley]

My last deal was a distressed sale that involved a lease-back to the seller. The property was court ordered to be sold by a Trustee arising from a divorce. Four other tenants were in place in the office/wharehouse, leaving two units available for owner occupancy (my son's business).

This is not about the deal, but about distressed sales and leasinging back to the seller.

In such cases, the first consideration will be the tenat's ability to pay. In pre-foreclosures,there is the concern that the mortgage was not paid, and if not current, will the rents be less than the mortgage obligation?

One consideration is that any equity due a motivated seller can easily be seller financed and rents offset the financing to the buyer.

Along the same lines, a sale lease back can also be structured in a sub-2 transaction where the underlying lender will allow and assumption of the loan. (smiled upon more favorably than residential transactions as the new buyer simply kisses the original notewith the seller). This can also be accomplished by the acquisition of the business entity and then dividing any on going business out of the newly created partnership.

So, as a forum discussion, what distressed situations might one find, where an investor can acquire an equity in a business or in real estate (or both) and lease back the interests to subsidize your deal? Situations might include estate settlements, divorce, partnership disolutions, pre-foreclosures, bankruptcy, or any business downturns.