A sale-leaseback transaction: Is it right for your business?

Abstract

A sale-leaseback is defined as the sale of an owner-occupied property to a real estate investor followed by leasing back space from the new owner. The goal for the vendor essentially is to raise capital while retaining use of the facility in question, while the purchaser is happy to acquire stable, long-term cash flow; however, sale-leasebacks are not this simplistic and, in fact, are not suitable for every corporation. It is key to understand, not only the company's real estate, but also its overall corporate strategy, before determining if such a transaction is suitable. Understanding whether a sale-leaseback transaction could work for a corporation requires a robust financial model, a look at the pros and cons, approach and rationale, and more.