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Sun Pac

With the economy improving and interest rates unlikely to rise in the short to medium term, we start 2014 in an optimistic mood. London continues to attract a worldwide audience and the country markets are showing signs of recovery.

The Challenge

Sun Pac’s owner and patriarch of the family was interested in selling the company when our client expressed interest in purchasing the company and growing it from a regional player into a national brand. However, the Sun Pac sale included a real estate holding that included a 355,000-square-foot facility housing its production and a warehouse of refrigerated, frozen and dry products. This asset, while vital to production, was viewed by our client as a challenge, as they didn’t want to be an owner of real estate. They wanted their capital to be poured into other vital areas necessary to run the operation profitably.

Savills Studley’s Response

After careful review of Sun Pac’s existing mortgages, floor plans, site plans and architecture, Savills Studley recommended a sale lease-back—a transaction in which the buyer of Sun Pac sells a property to a third party investor and then leases it back from them, effectively making the investor the landlord of the property. Savills Studley shepherded overtures to 25 real estate investment trusts and investor groups. The final purchaser of the asset was the investor/landlord group that paid the highest amount for the building and gave the most favorable terms to our client, who was pleased to complete a long term lease with flexibility.

The Solution

Through the sale leaseback process, the balance sheet of the business improved greatly. Since our client is leasing the property, they defer a good portion of the tax liability. With a lease now in place, they write off the full payment each month, as opposed to paying down a loan where only the interest can be written off, allowing the company to more efficiently utilize its capital.

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Key contacts

Stan Krawitz

Stan Krawitz

Vice Chairman – Founder, Head of Canada

Savills Toronto

+1 416 480 0745 Ext. 3030

 

Ken Norris

Ken Norris

Senior Vice President, Branch Manager – Ontario Office

Savills Toronto

+1 416 480 0745 Ext. 3047