What is a sale-leaseback transaction?

A sale-leaseback transaction is characterized by the owner selling an asset—typically real estate or property—and simultaneously entering into a lease agreement to continue using that asset. This arrangement allows the seller to convert the property into liquid capital while retaining the ability to use the property as a tenant.

The reasoning behind a sale-leaseback can vary; sellers might need to raise funds for business operations or pay down debt while still requiring access to the property. The buyer, often an investor, acquires a property that generates rental income.

The other options represent different types of agreements: a lease with an option to buy allows a tenant to purchase the property at a later date; a rent-to-own agreement is a specific type of lease where rent payments contribute towards the purchase price of the property; and a joint venture for property development involves multiple parties collaborating on a development project instead of one party selling and leasing back a property. Each option serves distinct purposes, which highlights why the sale-leaseback structure is uniquely beneficial for specific financial strategies.