Video transcription: Experts' views - Alain Bréau - Sales Director - Real-Estate Leasing, Natixis Lease
Experts' views - Alain Bréau, Directeur commercial Crédit-bail immobilier Natixis Lease (Vidéo)
Could you define, in layman’s terms, what is real-estate leasing and tell us how it works?
Real-estate leasing is a means to finance business real-estate in the long term, mainly for companies but also for heritage structures held by business owners. It’s quite simple: the bank, i.e. the financial institution specialized in real estate, purchases a building, rents it out for a period of 7 to 15 years and sells it back after that period at an agree-to price, generally around one euro.
How does it work? Well, it is a mode of financing that concerns existing buildings but also buildings under construction, which means that through real-estate leasing, one can buy a plot and then build a building. In such a case, the business owner is building a productive asset fully dedicated to his business.
What are the advantages of real-estate leasing?
First, we have the advantages in terms of financing portion, as real-estate leasing, contrary to traditional financing, gives the possibility to finance nearly 100% of purchase price, sometimes even the registration fees. This provides a competitive edge over simple finance. Only real-estate leasing can offer that today as we are own the good.
The second advantage is that real-estate leasing combines several loans into a single one, mostly concerning construction and the acquisition of plots for construction.
It includes short-term financing for the purchase of the plot and the construction phase. It includes the financing of VAT: no VAT advance is required for construction work. It also includes long-term financing: the amortization period of 12 to 15 years begins once the building has been built and the companies have been paid on a continuous flow basis by the leasing company.
Also, in real-estate leasing operations, the leaseholder can obviously house his/her business but he/she can also sublet to an outside company, which is the case in investments where the client who purchases a building can rent it out to a third party. This is authorized in the case of real-estate leasing. One of the big advantages is that the contract is transferable at any time, i.e. today when you enter into of real-estate leasing operation, you are no longer committed for 15 years as was the case a few years ago, as you can choose to get out of the contract at any time.
And what about leaseback?
It is very simple: a company that owns a highly amortized building has the possibility to sell it to the leasing company, which in turn will lease it back to the company for periods of 7 to 15 years, at an agreed-to rate. The biggest advantage is that the company can raise money to finance external growth, to finance expansion, or to get the cash it might need. This operation is free of registration fees as the sale of a building to a leasing company as part of a leaseback operation is free of registration fees.
What is the plus of Natixis Lease?
Natixis Lease has chosen to work closely with the Banque Populaire and Caisse d’Epargne retail banking networks.
Support is at all levels. Natixis Lease’s chargé d’affaires is a technical salesperson who must know all aspects of a product, whether the legal aspect, the advisory aspect, mostly for tax purposes, and obviously the real-estate aspect. What our clients expect of a real-estate leasing expert is advisory services. That his decision to invest in new premises be supported by our salesperson, choice of the plot, construction quality, etc.
We are present throughout the whole process and we do not hesitate to tell our clients when needed that the price is not accurate and that it should be revised. And when a scheme presents some risks related to pollution, the environment, etc. our legal department can help us set things right and put in context so the client does not enter into a bad operation.
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