Why do companies that own a building sell the building and lease a space in it? Ex: CBS with television city
In: 9
In addition to tax reasons, and maintenance reasons, it can also be a cashflow solution. If you own a million dollar building, then that million dollars is “stuck” there. If you sell the million dollar building, then lease the space back for fifty thousand a year, you have 950k to spend on buying new equipment, hiring new people, paying salaries, etc.
Even better, as others have said, if you only need part of the building, you can pay less in rent since the new building owner can collect rent from other tenants.
It is also a great way to reduce how much the company owns, and how much it owes, which makes it easier to be acquired by a larger company (such as Paramount).
Note that this also can be done if the value of the property changes significantly.
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