What is a Sale-Leaseback?

Posted on March 12, 2020

A sale-leaseback transaction occurs when a business sells the land or buildings it owns/operates but continues to occupy the space by leasing the property back from the new owner. In recent years, these flexible financing vehicles have increased in popularity as a growing number of businesses look for ways to free up capital and reinvest those dollars back into their operations. For example, venerable retailer Bed Bath & Beyond kicked off the New Year by executing a $250 million sale of approximately 2.1 million square feet of commercial space, which the company will lease back from the buyer under the provisions of long-term lease agreements. According to the retailer, the sale-leaseback will bring enhanced liquidity that it can use to revive its brand and “build a stronger, more efficient foundation to support revenue growth, financial stability and enhance shareholder value.”

By divesting themselves of their real estate holdings, retailers, restaurant operators and even physicians who own medical office can enhance liquidity without carrying debt on their balance sheets and reallocate those assets to their core business needs. By contrast, buyers and investors in these properties receive immediate return on their equity investments, thanks to loing0term leases already in place, and portfolio diversification and stability in asset class that is not susceptible to the swings of the public equity markets.

With offices in Miami, Orlando, New York City and Geneva, the team at Orion works with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.