FINANCING DEVELOPMENTS IN SINGAPORE - SALE-&-LEASEBACK

Abstract

The importance of finance in real estate developments or investments is axiomatic. The profitability of most transactions is primarily based on a financial arrangement designed to enlarge the returns on the development or investment. Real estate offers an investor the highest leveraging opportunities of any investment alternative. Although many transactions require 20% to 25% of a property's value to be invested initially as a cash down payment, a few investors, after completing some highly sophisticated financing strategies, enjoy the benefits of being able to arrange their real estate investment portfolios with greater than 100% leverage and end up with cash in their pockets. One of these sophisticated financing strategies is sale-and-leaseback. This dissertation is an attempt to introduce sale-and-leaseback as a flexible and innovative financing tool to real estate entrepreneurs in Singapore. This study is done by explaining the philosophy of sale-and-leaseback financing, and examining the weaknesses of currently used financing techniques in Singapore (namely mortgage and equity financing) in order to provide a contrast to the advantages and disadvantages of sale-and-leaseback financing. This study also demonstrates a technique for deciding the method of financing a proposed flatted factory development in Singapore, using computer-aided techniques. Finally applicability and likelihood of acceptance sale-and-leaseback will be discussed.