Leasehold Equities is the home of a patented technique to finance the acquisition of commercial property without a balance sheet liability—whether in the form of a mortgage or the lease liability mandated under final lease accounting standards issued by the FASB and IASB in early 2016.1/ Our technique also avoids earnings charges associated with such a liability, typically saving well over 40% of the GAAP expense associated with a 15-year lease of the same building—based on a comparison of the present value of earnings charges per common share of the building user.
We accomplish these results by financing the purchase or construction of a building or other long-lived asset with ILPS Preferred® stock, dividends on which are funded through an internal lease between a corporate user and its sister company finance subsidiary that issues the stock.2/. In projections using real world properties the reduced cost of capital and accounting advantages of ILPS Preferred® have demonstrated savings of between 68% and 75% in the present value of a corporate user’s overall earnings charges, which equates to a savings of 29% to 48% per common share, in comparison to a long-term lease.
In the corporate real estate arena ILPS Preferred® is especially useful for acquiring or refinancing core assets such as a headquarters building or data center, and for new construction including tenant improvements. It can also be used to avoid a balance sheet liability and lower earnings charges for long-lived equipment such as airplanes, truck fleets, and factory equipment.
To the Asset User
To the Preferred Stock Investor
1/Financial Accounting Standards Board, Accounting Standards Codification 842, Leases, February 25, 2016; International Accounting Standards Board, International Financial Reporting Standards 16: Leases, January 13, 2016.
2/ ILPS Preferred® is protected by U.S. Patent No. 8,548,891, issued October 1, 2013 to Leasehold Equities LLC.