Operating Company / Property Company Deal (Opco/propco deal)
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Definition: Operating Company / Property Company Deal (Opco/propco deal)
Opco/propco deal is a business arrangement in which subsidiary (Property Company) of a parent company (Operating Company) owns all revenue generating assets and parent company take those assets on lease to generate revenue.
Opco/propco structure involves sale and leaseback process. Take an example of restaurant chain which has 10 restaurant. The company will create a subsidiary and sells all assets to the subsidiary (propco). The amount of money freed from this transaction is used for expansion or any other work. The subsidiary will lease these assets to the parent company. In this way property company will also be able to raise capital separately. All the assets would be operated by operating company or parent company.
This kind of deal is beneficial to both operating company and Property Company. By releasing funds operating company will be able to expand further and Property Company will be able to raise more capital independent of operating company.