CASE · NUMBERS
Sale & leaseback — worked case calculation
Theory is one thing. Numbers are another. Here is a worked case of a typical sale & leaseback transaction: mid-size Danish manufacturer with a 4,000 sqm production and logistics property. We show property value, rent, investor return and seller balance sheet effect.
Starting point — the company
- Industry: Mid-size Danish manufacturer (DKK 120m revenue, DKK 12m profit)
- Property: 4,000 sqm production + 1,500 sqm warehouse, Trekanten region
- Book value: DKK 60m
- Current situation: Property on balance, encumbered with DKK 25m debt
- Business goal: Free capital for competitor acquisition + expand production line
Step 1 — valuation and pricing
We assess market value at DKK 75m based on comparable transactions, technical condition and location. Thus:
- Book value: DKK 60m
- Market value (sale price): DKK 75m
- Realised capital gain: DKK 15m
Step 2 — lease structure
| Element | Value |
|---|---|
| Annual rent (4.5 % of purchase price) | DKK 3,375,000 |
| Indexation | CPI, min. 2 % annually |
| Lease term | 15 years non-terminable + 2 x 5-year options |
| Maintenance (roof, structure) | Landlord |
| Operating costs (utilities, insurance) | Tenant |
Step 3 — capital inflow to seller
| Item | Amount (DKK m) |
|---|---|
| Sale price (gross proceeds) | 75.0 |
| Less: existing debt repayment | -25.0 |
| Less: transaction costs (legal, audit, fee) | -2.5 |
| Less: capital gains tax (22 % of DKK 15m gain) | -3.3 |
| Net capital release | 44.2 |
The company receives approx. DKK 44m free capital to invest in acquisitions, production expansion, marketing or debt reduction.
Step 4 — effect on operating result
Before transaction: Property costs (depreciation, interest on property debt, maintenance) approx. DKK 2.8m/year.
After transaction: Annual rent DKK 3.375m — an increase in operating cost of approx. DKK 575,000/year. In return, DKK 44m is freed; invested at 10 % return yields DKK 4.4m/year — net effect +DKK 3.8m/year.
Step 5 — investor perspective
- Purchase price: DKK 75m
- Annual rent: DKK 3.375m (4.5 % gross yield)
- WAULT: 15 years with strong covenant
- Value appreciation: Estimated 2-3 % annually with indexation
- Exit: After 7-10 years to pension fund or listed REIT
- Total IRR (10 years): 6.5-8 %
Balance sheet effect for seller
| Item | Before (DKK m) | After (DKK m) |
|---|---|---|
| Property (asset) | 60.0 | 0 |
| Liquidity | 5.0 | 49.2 |
| Property debt | 25.0 | 0 |
| Lease liability (IFRS 16) | 0 | 38.0 * |
| Equity (net improvement) | — | +11.7 |
* IFRS 16 requires long-term lease liabilities to be capitalised on balance sheet. Handled together with your auditor.
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