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What does American Pet
Care Properties do?
What is sales/leaseback?
Why is sale/leaseback
attractive to the veterinary industry?
What is build-to-suit?
Why is build-to-suit
attractive to the veterinary industry?
What
does American Pet Care Properties do?
- American Pet Care Properties provides
the ability to build your dream facility, or free up much
needed cash for expansion, remodel, acquisition or retirement
through innovative sale/leaseback and build-to-suit solutions
tailored to the pet care industry. TOP
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What is sales/leaseback?
- Sale/leaseback is a progressive financing
facility that has been around for decades and is heavily
utilized in virtually every industry, including human medicine
and dentistry.
- Sale-leaseback allows a veterinarian
to raise much needed cash by selling the practice’s
real estate (and only the real estate) to American Pet
Care Properties, who then leases the property back to the
seller on a long term basis. TOP
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Why
is sale/leaseback attractive to the veterinary industry?
- Ability to Utilize Fixed Assets
- Practices routinely seek financing
to pay down debt, expand their practices, fund acquisitions,
transition out of a lease or construct new facilities.
Options to finance these activities include borrowing
funds, taking on partners or investors, or selling
assets, all of which can be expensive and onerous.
Sale/leaseback financing provides a company with
access to up to 100% of the value of their real estate
property, generating funds that can be used for practice
expansion initiatives or liquidity, while providing
the practice with complete control of its facilities. TOP
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- A Good Source Of Capital
- One of the more significant benefits
of the sale-leaseback is that it allows practices to
free capital tied up in real estate. The value of real
estate remains largely intangible for as long as the
practice owns the property. As a result, a substantial
amount of capital that a practice could use more productively
to expand or improve its practice is tied to these
assets.
- Traditional financing methods,
such as a mortgage, allow the owner of a property
to cash-out only a portion of the value of the property
due to loan-to-value limitations. A sale-leaseback,
however, will usually offer liquidity up to 100%
of an asset's value. TOP
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- A Responsible Diversification
- While real estate can be a valuable
portion of any investment portfolio, it is important
to diversify the risks of the portfolio so that one
or more assets are not co-reliant.
- Practices that own their own
real estate have inadvertently created a highly risky
co-dependency between their two largest investments
(the practice operations and the real estate operations).
If a problem ever were to occur with the real estate,
it could directly impinge on practice revenues. Likewise,
if the practice revenues were ever impinged upon
(for example due to an illness, etc.), the real estate
would be directly affected, with the potential for
foreclosure and loss of the investment.
TOP
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- Allows for Retention of Location
and Control
- Unlike other liquidation options
(for example sale and move to a 3rd party leased
facility), a sale/leaseback will allow a practice
to remain in their current well known location while
maintaining complete control over the operation of
their facilities for their useful life -- all while
having the benefit of the use of the cash from the
sale of the property. TOP
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- Benefits To the Balance Sheet
- Real estate holdings appear
on a practice’s balance sheet as fixed assets.
If the practice has mortgaged the property, any outstanding
debt obligation on the mortgage will appear as a
liability, offsetting the value of the asset. Moreover,
because these assets are largely illiquid, they produce
little or no return in the form of available capital,
a very important factor when evaluating a practice’s
financial standing. Traditional balance sheet ratios
improve with a sale-leaseback transaction. TOP
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- Improved Financial Image
- A sale-leaseback can improve
a practice’s financial image. At the same time
that it replaces illiquid assets with cash, a practice
can also remove liabilities associated with the real
estate from its balance sheet, a practice called "off-balance-sheet
financing." This type of financing does not
add debt to a balance sheet. Since lease expenses
are factored into a company’s net income calculation,
they do not appear as a liability. TOP
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- Additional Advantages
- Other liabilities are also minimized.
A properly drafted sale-leaseback arrangement will
result in lease payments being deductible for income
tax purposes. That portion of mortgage payments on
owned real estate attributable to amortization would
not be deductible. TOP
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What
is build-to-suit?
- The build-to-suit model works especially
well for practices which are looking to build new facilities
for expansion or relocation.
- Build-to-suit allows a veterinarian, or
group of veterinarians to build their dream facility with
no up-front investment.
- Build-to-suit allows a practice to pick
a location and design the facility of their dreams, using
an architect of the practice’s choosing.
- When the design has been completed to the
practice’s satisfaction, American Pet Care Properties
handles all of the financing and construction of the facility,
resulting in no upfront construction investment for the tenants.
- When the facility is ready to be occupied,
American Pet Care Properties provides long-term leaseback
terms – allowing them all of the benefits of ownership
in addition to the inherent benefits of the sale/leaseback
model. TOP
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Why is
build-to-suit attractive to the veterinary industry?
- Due to the nature of American Pet Care
Properties build-to-suit model, the practice gets all of
the benefits of building a fully custom facility, as well
as the benefits of the sale/leaseback model outlined above.
- The practice can pick their own location,
architect and design and still eliminate the huge up front
investment in the construction of a facility.
- The practice can continue to operate in
their existing facility until the new one is ready to be
occupied. TOP
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