Private Sector

The FinReal model

The ground of a residential real estate portfolio is sold and rented (back) by the seller on a long-term basis under a finance lease or leasehold, usually over 80-100 years. During the lease period the seller/leaseholder has the right to buy back the sold ground at certain dates. At the end of the lease period - after 80-100 years - the buyback is free of charge (f. example EUR 1.-).

Suitable sales objects

  • Apartment houses with rental apartments

Advantages of the FinReal model

The attraction of the FinReal Sale & Leaseback model as a financing tool for Private Sector Entities:

  • Through the sale of the ground the Private Sector owner immediately receives the full market value, in cash, but can continue to use the entire property (ground +buildings) without restrictions - through the leaseback - as if the ground had never been sold.
  • The use of idle capital increases efficiency, since the non-earning part of the real estate portfolio - the ground - is converted into cash, which the seller/leaseholder can use as equity in a move to expand the business and to increase the ROE.
  • Low-cost funding due to the aggregation of many properties in different locations. Attractive fund raising model for real estate owners in the private sector that are usually unable to raise (longterm) debt at competitive rates.
  • Stable funding cost at low levels thanks to the general deflationary environment. The leasing rate should remain low over the long term - even after any inflationary adjustments - as the deflationary pressure in the economy is widely expected to remain in place.
  • Access to ultra-long-term financing - comparable to a perpetual bond - usually not available to private-sector borrowers.
  • Flexibility due to the buy-back option, which enables an early exit on different dates with a buy-back price of only 1.- (EUR/CHF/DKK/SEK) at the end of the lease period.
  • Fiscal conversion of the property into a fully depreciable property, as the non-depreciable element - the ground - is sold.
  • Deductible lease payments, like interest payments

Interested? Get in touch!

If you have a specific project or questions about the FinReal concept, do not hesitate to get in touch. Together we can work out a suitable financing solution for you.