Can anyone point me in the right direction to learn about/become competent modeling sale leasebacks? From some google searches it looks like the topic is discussed in chapter 15 of Brueggeman and Fisher. I don't have the book in front of me but can get access to a copy if there is some good information in the chapter. Otherwise, are there any other good resources or books that you'd recommend?
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What type of modeling are you talking about? Are you trying to model the company's cash flow after doing a sale leaseback or are you modeling from a real estate perspective?
It's not really any different from a leased investment. Perhaps they're selling for cash, or maybe they're looking to move and have not found the right space yet. In that case you'd want to model they vacate 100% after X number of months.
Another thing to keep in mind is market rent. Make sure you're only paying for any above market piece for during their lease period. If you assume you will not get what they are paying after they leave, you're overpaying on the building. Argus will do this for you, but if you're looking at yields or modeling in Excel, take the NPV of the above market piece and subtract it from your basis. Remember to check their credit if you're doing a longer term lease as well.
I thought it was interesting that to hear that a lot of solid credit tenants will buy buildings, sign a ten-year lease and then sell at a huge number. It's a real estate play for a non-real estate company (ex. furniture), and they make a lot of money doing so.
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