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Old 09-28-2005, 11:03 AM
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Default Facilitating an Acquisition of a Mid-Sized Company through a Sale Leaseback

A mid-Western lender----though active nationwide---is now actively seeking
to do sale lease transactions on the intermediate sized, privately held (and
hence unrated) company..

Sorting through their proposal on a real estate-related deal, it could well
also be used to provide an innovative financing for acquisitions on the modest
or mid-sized company--i.e. provided that the to-be-acquired companies
demonstrate adequate financial histories.

That is, the lending group could purchase the properties, and then lease
them back to the Acquiror/Borrower under a long term net lease---probably with a
term of 15 years or so, plus provide a negotiated options to extend the
lease.

So the lending format potentially could be used to finance the acquisition
of the mid-sized privately held company holding substantial real estate
assets---while simultaneously accomodating an operating control to run the business.

The primary benefit to the Acquiror/Borrower then is that he frees the
formerly locked-up value of the real estate in the targeted, privately held
company---and accordingly uses the to-be-acquired real estate itself to pay a
portion of the purchase price of the business, all the while retaining the basic
daily operating controls.

(And this is presumably to be done at a greater leverage ratio than for a
direct loan---thus hopefully to yield a greater lump-sum of sales proceeds to
contribute to the acquisition price.)



The lender focus is not on a specific credit rating since this is to be a
privately held company acquisition, but simply towards the basic financial
strength.

The Underwriting is of the following sort :

* A range of "mainline property types", i.e. office, industrial or retail.

* Transactions at $500,000 to $50 million.

* Minimum annual sales at $25 million.

* Profitable for the prior three years.

* Retained earnings at a minimum of $10 million.

Alternately, if the available lending loan-to-value approaches the total
leverage provided by this structure, one might want to evaluate further the loan
option.

If you wish to discuss your project, please feel free to call Mr. Margolin
of Chilmark Associates Inc. at 203-353-0897.


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