What is a sale-leaseback transaction?

A sale and leaseback is a financial transaction where a party sells an asset with the agreement of leasing the property back at an agreed rental rate and term. 

Sale leaseback is a financial transaction where the Lessor (owner) sells his/her own asset or property and then leases the same asset back from the Lessee (purchaser). 

It is a situation of selling a particular asset or property by the lessor who is the owner to an investor who is the lessee, also known as the buyer.

In the world of Real Estate, the sale leaseback also known as leaseback, allows or gives the lessor (owner) to sell a property to an investor (buyer, lessee, and landlord) while still occupying the property or asset. 

So when this happens, the lessor (seller or owner) becomes the new lessee (owner) of the property while the lessee (buyer, investor) becomes the new lessor of the property or asset involved.

How does a sale-leaseback transaction work?

There are two related agreement of real estate leaseback asset transaction:

· First, one of the agreements says that the asset’s original owner (who is the first lessor) agrees to sell the asset to the investor (who is the lessee) for a fixed stated price.

· Secondly, the investor (the new owner of the asset) agrees to lease the asset or property back to the former or existing occupant for a long fixed term leaseback agreement which gives the existing occupant the landlord of the asset or property.

The leaseback back transaction is as simple as ABC, It gives the seller (lessor) the entitlement to remain an occupant of an asset or property after been sold to an investor (lessee). On the other hand, the investor is buying the property with a long term tenant in place and generating cash flow.

Why would you do a sale-leaseback?

 In a sale-leaseback deal, the both party involved (Lessor and Lessee) derives so many benefits which are:

1. Benefits of sale-leaseback to the Lessor – The lessor still remains an occupant of a property or an asset while transferring ownership to the investor/lessee. Rent payment deducted as a business expense. ETC

2. Benefits of sale-leaseback to the Lessee – Deduction of depreciation charges on the property on their income levies. Power of a cash-flowing asset, backed by a long-term lease. ETC