Sale-leaseback
Corporate Capital Outlook - Q1 2023
"The first quarter of 2023 saw significant financial events continuing to cause stress in financial markets, with the Silicon Valley Bank's collapse and Credit Suisse's emergency takeover major contributors. Expected to compound the issue, there is over $2.5tn in commercial real estate debt which will mature in the next five years, with smaller regional U.S. banks holding 70% of outstanding loans to the CRE sector. Rising interest rates and reduced sales volumes will likely cause further defaults in the CRE and banking sector, but overall the global financial system is less exposed compared to the 2008 crash. Q1 2023 experienced the lowest volume of corporate net lease transactions for the past 3 years. The most popular asset class continues to be industrial & logistics followed by office. Despite the sharp rise in European base rates, we have not necessarily seen the mirror image in real estate yields. Written by Colliers Corporate Capital Solutions, the report details the current state of the global economy and capital markets and how that’s impacting the net lease sector. The report also features contributed content from Christopher Mertlitz, Head of European Investments at W. P. Carey, on how corporates can leverage real estate to unlock capital on attractive terms while the debt markets are in flux. Download below to read the full report.
A Bumpy Road Ahead, but Reasons for Optimism: Key Takeaways from MIPIM 2023
Last month, 23,000 CRE professionals traveled to Cannes for MIPIM 2023 – Europe’s largest real estate conference. Attendees soaked in the French Riviera sun on La Croisette as they gathered to discuss today’s real estate market and the potential opportunities and challenges that lie ahead. Shakeups and surprises in the financial markets took center stage, but optimism about the future of the commercial real estate market remained. Here were the three biggest topics that dominated the discussion and our perspective on what it means for the future. Financial market turmoil The conference kicked off amidst the largest banking failure in more than a decade with the collapse of Silicon Valley Bank (SVB), followed by the dramatic fall in the stock price of Credit Suisse and the subsequent announcement that UBS would be acquiring the company. The banking sector turmoil became a hot topic of conversation, with delegates divided over the economic impact of these micro-shocks. Some believed the downfall of SVB and Credit Suisse were not a signal for the entire economy, given SVB operated in a very specific ecosystem and Credit Suisse had faced a number of problems going back several years. Others felt it was eerily similar to the bank failures in 2008 and an indication we are moving into a financial crisis. Laser focus on interest rates For some delegates, the outlook off the back of the banking turmoil remained positive, as many thought the banking crisis would help stave off the Central Bank’s appetite for rate increases in their battle against inflation. Ultimately, this proved to be short-lived given the European Central Bank’s decision to raise interest rates across the Eurozone by 0.5 percentage points on March 16 and the Federal Reserve’s move to raise rates by 0.25 percentage points the following week. Interest rates, and the broader discussion concerning the pace of hikes, were topics already in focus long before MIPIM began. However, during the conference, there emerged a growing consensus that we are entering a new stage of the market with higher interest rates likely staying for the foreseeable future and old pricing levels now a thing of the past. Opportunities still available Where to source attractive investment opportunities was another key topic in Cannes. Similar to years prior, logistics led the way with regard to positive investor sentiment. Attendees agreed the fundamentals for the asset class remain strong, although in some markets many pointed out that logistics cap rates were slow to adjust to rising interest rates. Office, on the other hand, has largely fallen out of favor with investors given work-from-home and hybrid schedules remaining in place for many companies. Our perspective If an economic downturn is on our horizon, W. P. Carey is well positioned to weather the storm given we have a 50-year history of operating in all economic cycles. Our portfolio diversification, disciplined underwriting and lease structuring, and our well-positioned balance sheet, make us one of the safest REITs in terms of downside protection. As an all-equity buyer, W. P. Carey also remains well positioned to execute on deals and offer certainty of close given we aren’t reliant on third-party debt financing. For example, we recently announced a cross-border sale-leaseback of an industrial portfolio in Spain and Italy with Siderforgerossi, a leading manufacturer of specialized forged metal components. The facilities represent a significant portion of the company’s manufacturing footprint and are triple-net leased for a term of 25 years with annual rent increases. Despite the bumpy road ahead, I remain optimistic about the future. Rising interest rates make sale-leasebacks a more attractive financing option for corporates on a relative basis, meaning we’ll likely see an influx in opportunities in 2023. We always say that sale-leasebacks are a good tool in good times, but a great tool in uncertain times, and this sentiment couldn’t ring more true than it does today.
It's Sale-Leaseback's Time to Shine
The current capital environment has tested the adaptability of many companies, as increasing interest rates have made the cost of capital rise uncomfortably. And while it’s unknown if recent events will calm the Federal Reserve’s zeal for future hikes, some companies are already availing themselves of an alternative capital source: the sale-leaseback. In fact, the transaction type matched its 2019 peak in Q4 of 2021, and there are signs it may not be slowing. Zachary Pasanen, managing director, investments at W. P. Carey, sees two big factors playing into the current interest in sale-leaseback: cheaper cost of capital and extra liquidity during tough times. A Corporate Alternative to Expensive Capital A major concern for corporate real estate holders is reducing the cost of capital for the next several years. As Pasanen notes, while they are “not quite desperate yet, the lag between interest rates and cap rates hadn’t caught up six months ago, but it’s starting to now. Prudent CFOs are looking to maximize capital and a long-term sale-leaseback is a great way to do that.” A sale-leaseback offers a “naturally accretive” alternative funding source. Holders of good, fungible, mission-critical real estate that are willing to sign a long-term lease with market or better rental increases built in will likely find that the underlying rate with which they can monetize those assets is inside the going long-term borrowing rate, according to Pasanen. The 50-year-old REIT’s predominant focus has been on warehousing, specialty manufacturing and food production, but it also delves into the education and retail sectors, the latter ranging from experiential sites to fitness-related products to auto repair locations. “By and large, we’ll look at anything as long as there’s criticality to it, meaning the stuff is made at our subject facilities or there’s a really strong location story to it or rent coverage or just a good real estate fundamental story,” Pasanen says. A Liquidity Solution for Tough Times Another consideration facing corporate real estate owners is having the capital on hand to weather the current economic instability. Rates again become a major problem, especially for companies or properties that might be lower on the credit spectrum. “For companies facing challenges that don’t have the ability to finance at attractive rates it’s a very simple calculus: if your borrowing costs go up that’s going to eat into your profit margins and there are only so many levers you can play with when operating a business,” Pasanen said. “They have to be laser-focused on how to get through this period of instability and unknowns.” Sale-leasebacks appeal here as well, allowing companies to put money back into their core competencies or pay down shorter-term debt that’s gotten more expensive, or perhaps even expand given that acquisition targets may have become cheaper. But Pasanen also notes that W. P. Carey’s sale-leaseback business is not just a capital product for troubled times, whether or not it’s on top of mind for companies and owners. “A sale-leaseback is a good tool in good times and a great tool in really uncertain times,” says Pasanen.
The CFO's Cheat Sheet
In anticipation of a potential recession, it's more important than ever for CFOs to find ways to free up cash on their balance sheets. Having a strong balance sheet ensures your company will remain financially stable in any economic condition and allows you to take advantage of growth opportunities that may arise. While there are a number of different strategies CFOs can leverage to improve balance sheet health, here are a few of the most effective. Invest in higher-performing segments of the business—and ditch those that aren't performing By evaluating returns—or losses—from facilities, equipment, plants and other long-term hard assets, CFOs can identify low-performing assets. Selling or repurposing these assets allows CFOs to deploy cash to higher value activities and growth initiatives while delaying capital expenditure, thus improving a company's net income. Review Accounts Receivables and Payables Weak collection policies, slow invoicing, inefficient payment processes and out-of-market terms slows the cash-conversion cycle and ties up cash. CFOs can unlock extra cash for investment, dividend payments, debt payments and mergers and acquisitions by identifying gaps in receivables and payables from the prior year. Usually, a thorough analysis can reveal process gaps, unfavorable and unnecessary terms with customers and vendors and other near-term opportunities, which can help streamline and unlock working capital. Get Smart Credit Support CFOs who use letters of credit, surety bonds and cash collateral as credit support for regulatory or commercial purposes risk misallocating liquidity. A CFO and other stakeholders working with a legal expert can boost a company's liquidity by evaluating—on a regular basis—whether or not all credit support is still required. Where credit support is still necessary, CFOs should always examine the most capital-efficient way for their companies to offer financial collateral. Reduce the Cash Going Out A cash-flow deficit will lead to the eventual downfall of a business. However, reducing the money going out is an effective way to maintain a positive cash flow and improve the balance sheet. CFOs can optimize cash flow by mapping out best-case, worst-case and likely scenarios. If the company's likely scenario is similar to the worst-case scenario, CFOs must find ways to minimize the cash going out to free up more cash. A good starting point for CFOs is to review every detail of a company's Profit & Loss Report and ask the following questions: Why is the company utilizing cash? Can the company achieve this goal more efficiently and cost-effectively? Should the company stop spending the cash altogether? Is there a better deal from this or another supplier? Build Up Cash Reserve Besides managing the cash going out, CFOs need to monitor the cash held closely. This is the money businesses build up to take advantage of an unexpected opportunity or to use during emergencies. Without sufficient funds in reserve, businesses will always find themselves scrambling to secure financing quickly. The general rule of thumb is, until a company builds up its hold or protective balance, a third should be invested back into the business to boost growth, a third should go back into operations and a third should be held. Cash Flow Projection Negative and positive cash flow swings do not have to find CFOs off-guard. CFOs can perform a cash flow analysis to identify trends of negative and positive cash flow swings in a business. This allows a CFO to predict when a company will have a surplus or deficit of cash which helps in planning for the best time to pay expenses. The best practice here is to match a business's cash outflows to the inflows instead of depending on short-term borrowing to cover gaps. This is because, although short-term borrowing has lower interest rates, it still adds to the overall costs of a business. Leasing Equipment and Devices Leasing equipment, devices, motor vehicles and real estate may seem counterintuitive to someone who is only paying attention to the bottom line. However, leasing allows a company to free up more cash because it entails paying in small increments. An added advantage of leasing is that lease payments are considered business expenses and thus can be deducted from a company's tax obligations. Moreover, some devices and equipment can quickly become outdated, inefficient and incompatible with the latest technology. Constantly upgrading or buying new ones to keep up with technological advancements is very costly. Leasing devices and other equipment is an excellent way to stay up-to-date while freeing up cash to invest in high-value projects. Unlock Illiquid Capital Trapped in Real Estate Through a Sale-leaseback One often underused avenue of unlocking capital for company’s balance sheet is a sale-leaseback (also known as a sale-and-leaseback or leaseback). It is a financial transaction where a company sells its real estate to an investor for cash and then leases it from the buyer. When selecting a buyer, it’s important to find an established real estate investor who will value the property accordingly and will pay the full fair market value. Real estate is an illiquid asset that is a drag on many companies' balance sheets— particularly those not in the business of owning real estate. A sale-leaseback enables a company to sell real estate to an investor-landlord and continue to use the property through a long-term lease. Through a sale-leaseback, CFOs can unlock illiquid capital and reinvest it into growth initiatives or other high-performing areas of the business. If you’re considering a sale-leaseback, check out “Is a Sale-Leaseback Right for Your Business?” Conclusion Having a strong balance sheet is critical for several reasons. Ensuring a company has strong cash flows helps support ongoing operations through any economic cycle and gives the company the ability to take advantage of growth opportunities. If CFOs are interested in pursuing a sale-leaseback as part of their balance sheet strategy, working with an experienced partner like W. P. Carey can ensure the company is maximizing the value of their real estate and unlocking 100% of an otherwise illiquid asset. For a real-world example of how a sale-leaseback can be used to support a company’s balance sheet and growth, view a case study here. Think a sale-leaseback might be a good fit for you? Get in touch today!
What’s Next for Net Lease?
The effect of rising interest rates registers in many ways around the real estate world, but perhaps the starkest impact can be seen in the investment volume differential in one of CRE’s most popular sectors. Net lease investment volume decreased roughly 35% year over year in the third quarter, according to Jason Patterson of W. P. Carey. The VP of investments at one of the largest diversified net lease REITs notes the Fed’s impact on market players has been far-reaching. “Net lease volume prior to the Fed moves had been near or at record levels so the run-up in rates certainly impacted people getting on the same page with the value of real estate or what they were willing to commit to on a cap rate basis,” Patterson said. “A high level of volatility in a space where people are making long-term investments is not the ideal environment.” A Debt Market in Disarray Call it a pause, a disconnect, or total debt market disarray, 2022 has brought major headwinds to a CRE industry and net lease sector that have gotten accustomed to cheap capital. Yet, Patterson reports still seeing a lot of attractive opportunities in the market. “Private equity-backed sellers or tenants continue to use sale-leasebacks as an attractive form of unlocking tied-up capital in their acquisitions, a counter-inflationary move that in some cases has been beneficial to us,” he said. “They’re viewing it more and more as a regular, very attractive component of the capital stack, which I think is good from a broad industry perspective.” Unencumbered by rising capital costs, equity investors have certainly found more room to work within the net lease market “The current environment favors people in a high certainty or all-cash type of capital structure like W. P. Carey,” Patterson said. “We’ve seen increased focus on certainty of close as levered buyers signed up for deals maybe in the early part of the summer and then with rising debt costs their assumptions didn’t pan out. You see deals come back to market as more investors have to reevaluate pricing in this period of volatility.” 2023 Outlook Citing the first half 2022 industrial deal volume exceeding more than 50% of the STNL market, Patterson forecasts that industrial product will continue to be a very attractive investment target. He added though that not all industrial product types are created or viewed equally. “Rather than just lump everything into broad industrial, we’re looking for real estate that is extremely critical to operations for our tenants,” he said. “Maybe we’re willing to give up a little bit in terms of fungibility for increased certainty that tenants are going to renew and keep paying rent for the long term. Asset classes such as cold storage and food production are extremely important to users and they don’t have a ton of alternative options available.” A $75 million sale-leaseback W. P. Carey completed in the second quarter embodies the above trends. The 25-year net lease for six mission-critical specialty manufacturing facilities totaling approximately 1.1 million square feet in three countries is backed by private equity. “There continue to be more and more deals getting done with private equity sponsorship, and we’d expect that to largely continue in 2023,” Patterson said. “The trend, a positive one for the industry, really is private equity ownership looking toward sale-leasebacks.”
Top 3 Financial Strategies for CFOs to Fund Business
Inflation is currently at 8.2% year to year, way above its 2% benchmark. The Fed has increased interest rates three times in a row to try and keep inflation under control, with promises of further interest rate increases to achieve a terminal target of 4.6% in 2023. Higher interest rates have a direct impact on your funding efforts. Increasing rates reduces spending power, causing stock prices to fall almost immediately while increasing the cost of debt. In an ideal world, you would be able to make all the money you need by simply selling goods and services. But the general business strategy is that you need money to make money, which means getting external funding. Finding affordable funding can be a difficult strategic decision for any chief financial officer, especially in the current economy. While equity and debt are major sources of business funding, a sale-leaseback is a good option to consider when you are looking for more affordable financing. Here's a closer look at the pros and cons of debt, equity and sale-leasebacks and why a sale-leaseback may be the best financial strategy for your company in the prevailing economy. Public markets capital raise (equity and debt) One of the ways to raise funds is through debt or equity financing. With debt financing, you issue corporate bonds to the public and pay back the full loan amount plus interest upon maturity of the bond. Corporate bonds attract a higher rate of interest than government bonds because of the perceived higher risk, meaning more costs for you. Equity financing involves selling company shares in the stock market and paying the equity holders a dividend or return should the stock value appreciate. Your obligation to pay earnings to equity holders will depend on the types of shares held. Preferential shareholders receive payments first, while common shareholders get paid after creditors and preferred shareholders. Pros You can raise large sums of money from the public. Interest rates paid are typically lower than bank interest rates. Stock issuance does not require you to pay investors. Payments are based on business performance. Interest on debt financing is tax deductible but there are limitations. Cons The current rising interest rates have caused a general fall in share prices, making equity funding a less ideal way to raise funds. Equity raises dilute stocks since each shareholder owns a small piece of the company. The current economic slowdown makes it harder for businesses to get debt financing. Even when you do, the cost of debt is high and you have to pay lenders regardless of the performance of your business. While you do not have to repay equity, shareholders are entitled to a share of a company's earnings. Dividends paid to investors are not tax-deductible like in debt financing. Investors are a huge part of your company's decision-making. Outside funding can cause tension between your company and investors. Loans A loan can be handy when you need working capital or funds for short-term needs, especially when you are running a high-growth business. In this case, you can borrow money privately, for instance, from a bank. Pros The market has a variety of lenders you can chose from. Interest on debt financing is tax-deductible but there are limitations. Private borrowing can help boost your credit score. Cons Interest rates are rising, making it difficult to find a good rate for your loan. Banks are increasing their lending restrictions. Refinancing a loan can be more expensive as interest rates keep rising. You have to repay lenders even when your company isn't doing well, which can result in bankruptcy or litigation. Debt and equity finance can be risky. Failure to repay public debt or a loan can result in default or bankruptcy which affects corporate credit scores. Equity financing also has its downsides since you miss out on tax benefits and also risk ownership dissolution since new and old investors expect a share of corporate profits. These cons are a great reason why sale-leasebacks are the more attractive option. Sale-leaseback What is a sale-leaseback? A sale-leaseback, also called a sale-and-leaseback, is an agreement between you and an investor where you sell your real estate for 100% of the value of your property and simultaneously enter into a long-term lease for the same property. A sale-leaseback is not classified as debt or equity but as a hybrid debt product. You can access much-needed capital when you sell your real estate within a sale-leaseback agreement without increasing your debt. A sale-leaseback is the best financing option when you have cash invested in your property or land that you could use to better your cash flow or invest in profitable business projects while maintaining operational control of your asset. A sale-leaseback is one of the best financial strategies for CFOs to fund business as it can improve your financial statements. By enabling you to pay down debt and improve cash flows, sale-leasebacks can improve your company’s balance sheet health. Pros Rental payments from a sale-leaseback qualify for tax deductions. You transfer the volatility risks of owning your real estate to the new owner. The agreement involves a long-term lease at your agreed-upon rental rate, providing stability for the future. Sale-leasebacks generally fetch a lower rate in the current environment when compared to debt financing. You get a long-term capital partner who can fund future expansions, renovations and build-to-suits to help grow your business. If you're not in the business of owning real estate, you can unlock 100% of cash in illiquid real estate at market value and reinvest it in profitable areas of business. You can maintain operational control of your real estate after selling it. A sale-leaseback gives you immediate access to capital to reinvest in your core business operations compared to a loan or equity financing which may take some time. Cons If you've never done a sale-leaseback, you may not even know how to start. W. P. Carey can help. We specialize in acquiring real estate and creating custom sale-leaseback structures to meet your unique needs. You need to own your real estate assets to pursue a sale-leaseback, so this type of financing may not be possible for some businesses. We're here to help with your sale-leaseback needs If you are looking for more cash flow for your business, you could take the traditional route with capital raising or a loan or go for a sale-leaseback. A sale-leaseback may be the more attractive strategy to secure the financial flexibility you need to pursue your strategic business goals. Learn more about sale-leasebacks and how other companies use them as a powerful capital solution to fund business growth. Think a sale-leaseback is right for your company? Contact our team!
Leveraging corporate finance to unlock real estate capital
Economies and markets have grappled with a succession of enormous challenges in the wake of the pandemic. Healthcare and geopolitical crises have cascaded into the fiscal, financial, supply chain and monetary realms, with inflation rearing its head and interest rates rising in its wake. Rising interest rates will, in our view, cause commercial real estate values to correct significantly over a two-year timeframe. Some investors are taking to the side-lines in this period, subduing overall activity. Others are seeking opportunities. Many of these opportunities will emerge among corporates seeking to monetize their property assets in order to release capital. This will be for both defensive purposes (for instance, to service or pay down debt), or to explore new growth opportunities of their own. Written by Colliers Corporate Capital Solutions and featuring contributed content from Christopher Mertlitz, Head of European Investments at W. P. Carey, this 24-page whitepaper seeks to educate the reader on the macro-outlook of the global real estate pricing reset and evaluates a range of lesser-known capital-raising options for corporates to consider as traditional lenders grow more risk averse and bond issuance looks less attractive. Given the current market dynamics, sale-leaseback strategies appear to be emerging as the preferred solution for many corporates, particularly sub investment-grade organizations seeking to strengthen balance sheets. Find out why in this latest report.
Optimism Amidst Uncertainty: Key Takeaways from EXPO Real
Earlier this month, Europe’s largest real estate trade show EXPO Real returned in Munich. Nearly 40,000 attendees gathered to network and discuss trends, innovation and opportunities in the real estate market. Traditionally, EXPO is a place “where deals get done” but given the current challenges in the macroeconomic environment attendees were more focused on understanding where the market is heading into 2023. Here were three of the most prominent topics discussed. Rising interest rates With the European Central Bank announcing its third consecutive rate hike this month, interest rates were the main topic of discussion at EXPO Real. Largely, attendees were focused on how assets should be priced to reflect rising rates, with the consensus that we’ll continue to see cap rates rise and property prices fall into next year. However, a big challenge that attendees are facing is how to bridge the gap between seller expectations and the pricing buyers will need to generate adequate returns. To compound the issue, inflation remains at record highs in Europe which means more interest rate increases are certainly on the horizon. This will create an even more challenging environment for real estate investors that require third-party debt financing to close transactions, making all-equity buyers better positioned to execute on deals. Logistics still dominant Despite the macroeconomic doom and gloom, the current market still has room for certain sectors to thrive. Logistics remains the darling of the real estate world, with Europe seeing record logistics investment volumes in the first half of 2022. 20% of all real estate investment in Europe is in the logistics sector, suggesting there is still a very strong investor appetite for the asset class. The sector continues to benefit from tailwinds amplified by COVID such as the rise of e-commerce, which continues to drive occupier demand for logistics and warehouse space. Record-low inventory and high demand have meant the logistics sector has been slower to see cap rate increases than others; however, many are seeing a re-pricing period take place which is critical for investors looking to close transactions. Sale-leasebacks gaining prominence as bank lending becomes more restrictive Amidst all the uncertainty at EXPO Real, there was still an undercurrent of optimism among attendees. Historically, we’ve seen more sale-leaseback opportunities come to market in challenging economic environments as a result of companies seeking ways to shore up capital to support ongoing business operations and growth. With banks becoming more restrictive with lending, alternative forms of capital such as sale-leasebacks provide an immediate opportunity to plug the financing gap for companies. And with interest rates likely to continue rising into 2023, now is a great time to pursue a sale-leaseback and lock in an attractive rental rate for the long-term.
Three Ways CFOs are Leveraging Sale-leasebacks to Prepare for a Recession
The U.S. economy has hit some major roadblocks in recent months. Sustained high inflation, supply chain disruptions and rising interest rates have all signaled to economists that we are either in or on the verge of a possible recession. While there is no universal playbook on how to prepare for a possible recession, for companies that own their real estate, a sale-leaseback is one lesser-known, value-extracting method savvy CFOs should consider. In a sale-leaseback a company sells its real estate to an investor for cash and simultaneously enters into a long-term lease. Proceeds from the sale-leaseback can then be used to bolster a business’ balance sheet and provide the financial flexibility to help navigate a volatile economic environment. Here are three ways CFOs are using sale-leaseback proceeds to grow their businesses and prepare for an uncertain future: Pay down debt and improve credit The last thing businesses want to deal with when a recession hits is mountains of debt to pay down with limited cash flows. By pursuing a sale-leaseback now, companies can unlock capital to reduce leverage and improve their balance sheet health. The reduction in leverage helps improve both a business’ debt / EBITDA ratio in addition to debt / capitalization. As a result, companies will have less debt obligations to worry about and may even improve their credit – leaving them better positioned to weather an economic downturn and secure loans at attractive rates in the future should they need to. Redeploy capital to higher ROI business segments It is almost always the case that businesses can earn more by reinvesting the capital locked up in their real estate (an otherwise illiquid asset) into their core business operations. This makes sale-leasebacks an attractive capital tool for almost any business with owned real estate. Common uses of sale-leaseback capital that can boost a business’ returns include, acquiring new equipment, funding R&D, launching new product lines as well as growing their market share in existing business lines through acquisitions. Improving the efficiency of a business while increasing profits will not only help companies endure a short-term recession, but also position the business for long-term success. Unlock financial flexibility for future growth Sale-leasebacks are a unique financing structure as they give a business the opportunity to convert a non-earning asset into growth capital. Sale-leasebacks also typically have no more restrictive financial covenants than a traditional bank loan – providing CFOs with significant discretion in determining the best use of their company’s cash. In a recessionary environment when companies typically struggle with dwindling cash flows, having the extra capital from a sale-leaseback could offer companies the financial flexibility to take advantage of growth opportunities as they arise, setting them apart from their competitors who may be struggling just to stay afloat. Conclusion For many companies, sale-leasebacks are a cost-effective strategy to unlock capital which can help improve balance sheet health and enable companies to invest in growth, positioning them for longevity and success even amidst an economic downturn. Given the rising rate environment, it’s also advantageous for a company to pursue a sale-leaseback now to lock in an attractive long-term rental rate before interest rates likely rise again in the fall. Ultimately, preparing for a recession comes down to preparation. By making strategic business choices now, CFOs can prepare for an uncertain future.