CU 2.0 Podcast Episode 241 on What You Need to Know about Raising Capital with Sale-Leaseback Deals

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Ask Affinity Federal Credit Union in New Jersey how it recently came up with over $50 million – in cash – to fund branch expansion.

Or maybe ask Wescom Central Credit Union in Pasadena, CA where it came up with $59 million in cash.

The answer is the same for both: they sold their headquarters building.

But that didn’t leave them homeless.

They both leased back their HQ in a transaction that has become increasingly common in for-profit America. Called a sale-leaseback it typically puts many millions of ready cash in the hands of the sellers who in turn sign leases in their buildings that typically run 20 or more years.

Details on both transactions are in this CuTimes story.

Clicking around I found this CuTimes story by Ed Lopes and Steve Eimert which offered up the nitty-gritty of sale-leasebacks. Their company is CU Real Estate Solutions. 

So we got them on the podcast to offer the details of a transaction that remains rare among credit unions – but which many might want to look more closely at as opportunities for CUSO investments, loan participations and more multiply.

Here’s the fundamental logic of the deal. A credit union knows about financial services but is it truly expert at commercial real estate? Could it make more of a return taking the capital that is tied up in its real estate – headquarters buildings, branches, perhaps still more – putting that money to work in new loans, in CUSO investments, etc.

True enough, credit unions have been slow to plunge into this, but many other kinds of companies have turned this into a multi-billion dollar marketplace. Here’s a link to one source on the size of the US market and it is huge.

You want to learn about sale-leaseback.

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