California Real Estate Practice Exam

A purchaser in a sale-leaseback transaction would be least concerned about:

1. condition of improvements

2. depreciated book value of the improvement

3. general credit of the lessee

4. the location of the property

The correct answer is: condition of improvements

In a sale-leaseback transaction, the purchaser—who is essentially the new owner of the property—typically focuses on aspects that will impact their investment return and the long-term viability of the lease. In this context, the condition of improvements, while still important, is not the primary concern for the purchaser. What matters more to the purchaser is the ongoing revenue stream from lease payments, which is significantly influenced by the creditworthiness of the lessee. The general credit of the lessee helps assess whether they will consistently meet their rental obligations. Additionally, the depreciated book value of the improvements provides insight into the financial aspects of the investment, while the location of the property is critical for future value appreciation and marketability. Thus, while the condition of improvements is a factor, it is overshadowed by concerns related to financial stability, the reliability of income from lease payments, and the potential growth or depreciation of the property's value, making it the least significant concern for the purchaser in a sale-leaseback transaction.