KeyBank’s Synthetic Real Estate Lease Program
A Synthetic Real Estate Lease (SREL) is a creative financing tool that combines the operational flexibility of leasing with the economic benefits of ownership.
In addition to traditional structures such as sale‑leasebacks and credit‑tenant lease (CTL) financings, SRELs offer a flexible, capital-efficient alternative for organizations seeking to finance corporate real estate assets.
With the Financial Accounting Standards Board’s (FASB) ASC 842 now requiring companies to bring most leases, including operating leases, on the balance sheet, demand for synthetic leases is rising again. KeyBank is one of the few banking institutions with the regulatory authority to offer SRELs, supported by a team of experts advising across corporate real estate solutions.
| Key element | Strategic benefit |
| Investment-grade tenant profile | Enables access to attractive financing terms and supports execution at scale |
| 5–7 year lease term | Provides greater flexibility compared to longer-duration financing options |
| Bank/lessor ownership structure | Delivers balance sheet efficiency while maintaining operational use of the asset |
| Triple-net lease structure | Ensures full operational control of the property by the tenant |
| Interest-only (non-amortizing) rent payments | Reduces total occupancy cost and supports EPS improvement |
| 100% financing structure | Preserves cash flow by eliminating upfront capital investment |
| Limited balance sheet footprint under ASC 842 | Improves leverage metrics and enhances balance sheet presentation |
| End-of-term purchase/renewal options | Provides long-term strategic flexibility and a potential path to ownership |
| Tax ownership treatment with lease accounting | Combines ownership economics with accounting efficiency |
How SRELs compare to other common structures
Organizations evaluating real estate financing typically consider a range of structures, including sale-leasebacks and CTL financings. Each approach offers distinct advantages depending on an organization’s objectives, capital strategy, and operating priorities.
The financial benefits of SRELs: Clear, measurable, and strategic
SRELs deliver a combination of financial and operational advantages that directly support capital allocation and balance sheet strategy:
- Earnings Per Share (EPS) improvement
SRELs are non‑amortizing, so rent consists only of interest‑only payments. Rent is recorded as an operating expense, and overall occupancy cost is significantly lower than both traditional leases and on‑balance‑sheet financing. - Preserve cash flow
Because SRELs provide 100% financing, companies are able to include upfront capital expenditures within the structure. As a result, no cash outlay appears on the cash‑flow statement for real estate acquisition or improvements. - Balance sheet efficiency
Under FASB lease accounting standards set forth in ASC 842, only the present value of rent payments is recorded. The residual value guarantee component of a synthetic lease (typically covering most of the asset’s value) does not appear on the balance sheet, resulting in a 10-20% balance‑sheet footprint instead of 80–100% under typical financing. - Support rating agency metrics
Rating agencies follow lease-accounting rules, meaning they include only what appears on the balance sheet — not the residual value guarantee. This can help companies preserve leverage headroom and improve coverage ratios.
These combined financial and strategic benefits make SRELs particularly attractive where capital allocation and balance‑sheet optics matter deeply.
Is an SREL right for your organization?
An SREL may be the ideal solution if your organization is looking to:
- Improve EPS and financial performance
- Preserve cash for growth initiatives
- Reduce balance‑sheet impact compared to traditional financing
- Maintain long‑term control of key properties
- Access 100% financing at a fixed rate
In today’s environment, SRELs offer financial agility and operational control.
A differentiated capability
Key, through its subsidiary SELCO Services Corporation, is one of the few banks with regulatory authority to offer SRELs. The ability to own and lease real estate within a regulated environment is a unique advantage backed by a deep track record. Since the early 2000s, Key has originated more than $3 billion in SREL transactions for 30 clients, supported by more than $200 million in equity.
Let’s explore the possibilities
Key can help evaluate whether a Synthetic Real Estate Lease aligns with your organization’s strategic, financial, and operational priorities.
To start a conversation or run a scenario analysis, connect with:
- Jay Archambeault, Synthetic Real Estate Lease specialist
- Doug Chase, Credit‑Tenant Lease specialist