Synthetic Hype - Suitability Test |
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| Written by Stan Wendzel MBA, CPA, LEED AP | |||||
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Suitability Test
OK—now for some lake-home value. If you are willing lo work with a few flaws, the synthetic lease can be a beautiful option that some argue produces the lowest possible after-tax occupancy cost to a corporate lessee. So how do you know if a synthetic lease is right for you? When deciding whether or not you should use a synthetic lease to finance your next corporate facility you need to ask yourself a few fundamental questions:
1. Is your company willing to accept all the economic risks and rewards of real estate ownership?
2. Is your company in a tax-paying position where the tax benefits associated with owning real estate would be of significant value? 3. Is your company willing to sign a NNN or bond lease? 4. Can your company afford to use its borrowing capacity under its corporate-credit facilities to finance this property or is the borrowing capacity needed for activities more central to the company's core business? 5. Is the corporate real estate a "to-be-built" or "to-be-acquired" facility? Property already owned by the company cannot qualify for synthetic lease financing. 6. Does the total cost of the property exceed $10 million?
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