Sales/Leaseback

A sale-leaseback is a transaction where a company sells an asset it owns, like a property or equipment, to an investor and then immediately leases it back

. This allows the company to convert the asset's equity into cash for immediate use while retaining the ability to continue using the asset for a set period. The original owner becomes the tenant (lessee), and the buyer becomes the landlord (lessor).  

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Here's a breakdown of how it works:

1. The Sale

• The company sells an asset it currently owns to an investor.

• The sale is completed at an agreed-upon price, transferring ownership to the investor. 

2. The Lease

• Simultaneously with the sale, the original owner signs a long-term lease agreement with the new owner. 

• This lease specifies the terms, such as the lease duration, rental payments, and conditions for using the asset. 

• The original owner continues to operate and use the asset as a tenant. 

3. The Benefit

• For the seller/lessee: They receive a large, upfront payment from the sale, which can be used for working capital, expansion, or other business needs. They can continue operating their business without a lengthy disruption. 

• For the buyer/lessor: They acquire a long-term tenant and a predictable stream of rental income. They are also often not responsible for the day-to-day operations of the asset, as the tenant typically covers costs like maintenance, property taxes, and insurance, especially in a triple net lease structure.