Sale-leaseback transaction contributes to Frisch’s closings
More than a dozen Frisch's locations in the Cincinnati region received eviction notices. The locations had been owned by Frisch’s but were sold as part of a sale-leaseback transaction.
“There are plenty of examples of companies who went into this type of real estate strategy with good intentions, and it just didn’t work out,” said Carl Goertemoeller, executive director of the UC Real Estate Center. “I hope that’s not the case with Frisch’s, but we’ve seen this movie before.”
While sale-leaseback arrangements give companies an influx of money up front, Goertemoeller said they can be risky as they require annual rent increases that make it harder for companies to adapt to rising food, energy and labor costs.
“If you own the real estate, that gives you control,” he said. “If you have an underperforming location, it gives you the ability to monetize it by selling it. And it allows you as an ongoing enterprise to avoid having to pay rent.”
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