California Real Estate Practice Exam

The least important factor in a "sale-lease back" is:

1. A well designed general purpose building

2. A well located building

3. Seller's book value of the building

4. The credit rating of the lessee

The correct answer is: A well designed general purpose building

In a sale-leaseback arrangement, the primary focus is on the financial aspects and the stability of the investment rather than the physical characteristics of the building. The least important factor being a well-designed general purpose building aligns with the concept that the buyer of the property is primarily interested in the income generated from leasing it back to the seller. In this context, the seller's book value holds some significance as it can affect negotiations and the perceived value of the transaction. The credit rating of the lessee is crucial, as it provides information about the likelihood of the lessee meeting their rental payment obligations, which is a key concern for the buyer as an investor. Additionally, the location of the building can influence its desirability and profitability, making it a critical factor. However, while the design of the building may impact its functionality or marketability, it does not have the same weight as the other factors in this specific investment scenario. Investors in sale-leaseback transactions typically prioritize financial stability, income potential, and credit risk over the architectural features of the property.