Strategic Balance Sheet Management for Credit Unions
CU Capital Management was created alongside credit unions and credit union industry experts to bring unique capital and asset opportunities to credit unions.
Overview of Opportunities
The unique model created by CU Capital Management allows credit unions to participate in all aspects of the sale leaseback value chain as outlined below.
Credit unions can sell real estate used for operations (headquarters, operations centers, call centers, branches, etc.) and enter into a long-term leaseback of the space while immediately booking a capital gain of the difference between market value and carried value.
Through a CUSO structure, credit unions have the opportunity to invest in sale leaseback transactions by other credit unions. CUSO investors can expect to receive a net annual return of over 5% on their CUSO investment through the safe and reliable income generated by long-term leases to credit union tenants.
Credit unions have the opportunity to lend on sale leaseback transactions by other credit unions, either as the original lead lender or as a purchaser of a loan participation interest. Credit unions will be able to lend under both their Member Business Lending and CUSO lending powers. A diverse array of lending opportunities will exist including variable and fixed rate loans with a range of term lengths .
Sale Leasebacks for Credit Unions
Sale leaseback transactions provide credit unions the opportunity to optimize their balance sheet by unlocking capital through the sale of appreciated assets.
Through CU Capital Management, credit unions can access a turnkey solution to monetize real estate holdings for purposes of growing capital and enhancing reserves, expanding lending and investment capacity and significantly increasing their ability to serve members.
The unique CUSO structure of the CU Capital Management sale leaseback model allows credit unions to invest in and/or lend on similar transactions by other credit unions.
Please contact us to learn more about how a sale leaseback transaction can benefit your credit union today.
News and Resources
ASC Topic 842: Lease Accounting
Moss Adams guide to the new lease accounting standards, ASC 842. In a sale leaseback transaction, the seller can now recognize the full and complete gain-on-sale in the current period. Under the old accounting standard, ASC 840, the gain-on-sale was required to be recognized over the lease term. ASC 842 is currently in a voluntary adoption period for credit unions with mandatory adoption in 2022.
Current Expected Credit Loss FAQs for Credit Unions
Beginning in 2023, credit unions will need to recognize current expected credit losses (CECL) in full, at origination, for loans and investments. CECL replaces the current Allowance for Loan and Lease Losses (ALLL) accounting standard and is expected to result in an immediate hit to capital upon implementation as well as on a go-forward basis for most credit unions. This paper from the NAFCU provides answers to FAQs on how CECL may affect credit unions.
West Community Credit Union Sale Leaseback
In March 2019, West Community Credit Union was sitting on a Net Worth Ratio of 8.12% and facing growth constraints when it closed on a sale leaseback transaction of its corporate headquarters. This transaction successfully raised the credit union's Net Worth Ratio by 80 basis points while simultaneously allowing the institution to rebuild a branch, invest in new technology for members and generate additional annual net interest income well in excess of the new lease expense.
Webinar: Sale Leaseback Transactions for Credit Unions
Mitchell Amsler, CEO of CU Capital Management, will explain the opportunities for credit unions selling their appreciated real estate to raise capital. Guy Messick, General Counsel of NACUSO, will explain the opportunities for credit unions to invest in CUSOs that will purchase the real property and earn investment returns from the lease revenue. Guy will also talk about lending opportunities for credit unions making commercial loans to these CUSO landlords.