Can anyone explain to me why banks want to finance their own NNN branches? Why don't they just buy the thing?
Just curious if someone can explain this to me.  

So bank A has a long term NNN lease on a property for a branch.  Property pops for sale, and they have no interest in buying but says they will beat anyone else on the loan pack since they are the tenant.  

This comes down to some sort of lending capacity vs cash on hand I guess?  Or that they can sell the loan later if they need to?  

Seems counter intuitive as fuck that they'd let you leverage their own money against them like that when they can completely avoid it easily.  Its like owner financing a sale/leaseback.
[{"id": "cq7wyne", "text": "It is basically like owner financing a sale/leaseback only better.  You see they are going to finance the property with someone else's money, charge the owner a higher rate and keep the difference.   This way they put up no cash of their own and make money off it.  Or like you said, they could sell the loan to someone else. Also they prefer to rent the same way most banks prefer NNN leases.  They would rather keep their capital and pour it into their business and make 10-20% (or whatever their ROI is in their business) vs the 5-10% return they get if they owned the property.  ", "replies": [{"id": "cq7zdf9", "text": "How is this actually funded with the bank?  Does this come out of cash on hand/deposits or is it floated with short term loans?  Does it matter?  Assuming they don't sell it.  \n\nIf they do sell it does anyone say 'hey hold on a minute, why are you selling a loan you are basically securing?  do you know something about this?'  If you have 20 years left I can see that not mattering, if you want to sell a loan you have 5 years left on and it balloons after that..... I could see that being a problem", "replies": [{"id": "cq81ojv", "text": "You would have to talk to a banker to answer those questions.  I've just bought and sold commercial real estate so I have an idea of their motives, but I'm not an expert. ", "replies": [{"id": "cq81ro2", "text": "when this closes I'm going to buy the banker a steak dinner and pound him for answers.  I'll report back.  I don't want to tell him this makes no sense until then though lol ;)\n\n//tongue in cheek, I'm sure they have their reasons, its just not appropriate to get into them when something is being negotiatied", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "cq7x9q9", "text": "It's funny you mention this, last night I attended a pretty intimate Suntrust meet and greet. I was talking with the CEO of Suntrust and he mentioned that they were considering a sale/leaseback on our local building but wanted to finance the loan. So it's exactly like owner financing a sale/leaseback. \n\nBased on our short conversation, I got the impression that they want to 1) free up capital and 2) sell the loans at a future date. \n\nBut again, I could be completely off base. Once banker's start mentioning acronym after acronym, I get a bit lost. ", "replies": [], "depth": 1}, {"id": "cq7yqzg", "text": "I can't find the academic/news articles in a quick google search and college was a long time ago, but IIRC it has to do with capital efficiency ratios &amp; thinning of balance sheets, as well as capital vs expense accounting.  \n\nHere in Charlotte, people at BAC are going through major projects regarding the real estate portfolio becasue of upcoming changes to lease accounting rules. Again, I don't know the details but just the fringes. Hopefull someone with more knowledge can shoot the straight dope.\n\n\nI did find this [article from FASB](http://www.fasb.org/jsp/FASB/FASBContent_C/ProjectUpdatePage&amp;cid=900000011123), haven't read it all yet", "replies": [], "depth": 1}, {"id": "cq8dvz8", "text": "In the early part of my career I made a nice living convincing companies (small local companies, manufacturers) that owned their R.E., we would buy the property from them in a new JV, they would get a certain percentage of the JV (5-25%), they would sign a long term lease, which we would use to get really nice financing, we put up 100% of the equity needed, usually financed 70%-75% of the purchased, and usually got a 10% to 15% cash on cash return. The seller freed up some badly needed capital, sometimes to deal with capes, buy new equipment, expand, they had set fixed lease terms, and ancillary cash flow, and some tax benefits.  \n\nThen I know of McDonald's people would be amazed how much money McDonald's make off of their real estate holding and from their franchisers. Often corporate McDonald's is able to get very nice sweetheart deals from mall and other reatail sites. McDonald's corporate signs a long term lease (which helps developer gets financing) let's say for $5,000 a month. They then turn around and on top of all the usual franchise fees, they sublease the pad to the new franchisee for a minimum of $5000 but say up to 2% to 5% of revenue. I once saw a deal where McDonald's was making $25,000 a month on a deal that was costing them $3500. \n\n\n\n", "replies": [{"id": "cq8ughu", "text": "Some people think mcdonalds is a fast food business.  It's actually a real estate business.  Leave that food crap for the franchisees. No /s. They have in house financing and banks usually can't touch it because they do not allow assignment of franchise rights, so any buildout our goodwill financing is essentially unsecured. ", "replies": [{"id": "cq8yib9", "text": "I always heard McDonalds is the second most successful real estate business in all of history only to the Catholic Church", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "cqbk5zy", "text": "Having a leasehold interest in the space is more in line with a lender's overall business model and risk appetite than having fee simple ownership. \n\nSaid bank should have a better RAROC on the capital it lends than on the capital required in ownership.  ", "replies": [], "depth": 1}]