Why More Companies Are Embracing Sale-Leaseback Transactions

In a financial climate marked by rising interest rates, evolving capital strategies, and intense shareholder expectations, CFOs are reevaluating how they treat one of the most undervalued resources on their balance sheet: real estate. Increasingly, companies are turning to sale-leaseback transactions—a strategic move that transforms owned property into immediate capital while allowing the business to retain operational control.

Sale-leasebacks are not new, but their relevance is growing. Once considered a niche tactic or private equity play, this financial strategy is becoming mainstream among public companies, mid-market enterprises, and even closely held family firms. According to CBRE Research, the number of sale-leaseback deals rose by over 20% year-over-year in the industrial and logistics sectors alone in 2024, a clear signal that real estate is no longer just a location decision—it’s a capital allocation decision.

What Is a Sale-Leaseback?

A sale-leaseback is a financial transaction where a company sells its owned property—such as office buildings, warehouses, or manufacturing sites—to an investor and then leases it back from the new owner under a long-term lease agreement. The result: the company gets an upfront cash infusion, often at a favorable valuation, while continuing to operate from the same location without disruption.

It converts an illiquid, non-core asset into working capital or debt-reduction proceeds, while preserving operational continuity and often improving the company’s financial ratios.

The Strategic Appeal to CFOs

For finance leaders, especially those at the helm of $10M+ revenue companies or publicly traded firms, the appeal of a sale-leaseback lies in its financial and operational duality. It frees up trapped capital without undermining operational infrastructure.

“Sale-leasebacks allow us to generate liquidity without the constraints of traditional debt or the dilution of equity,” said Amanda Kellogg, CFO of a national logistics firm. “It’s a flexible, strategic form of self-financing that also improves our return on assets.”

Here are the major drivers behind the growing adoption of sale-leasebacks:

1. Capital Efficiency and Liquidity

One of the most compelling reasons to pursue a sale-leaseback is capital efficiency. A property that sits on the books at historical cost may have appreciated substantially over time, especially in industrial or urban office markets. By selling the asset and leasing it back, the company unlocks that embedded equity.

This influx of capital can be used to:

Pay down expensive debt
Reinvest in higher-yield operations
Fund acquisitions
Build out technology and digital infrastructure
Return capital to shareholders

In a high-interest-rate environment, this form of non-dilutive capital can often be cheaper than equity or traditional loans—especially when paired with favorable lease terms.

2. Balance Sheet Optimization

Modern CFOs are measured on more than just earnings; they’re also judged on metrics like return on invested capital (ROIC), debt-to-equity, and asset turnover. Real estate, while valuable, can drag on these metrics because it’s non-operating and illiquid.

A sale-leaseback improves the optics and substance of a company’s financial statements:

Improves ROIC by reducing the asset base without hurting earnings
Reduces leverage ratios when proceeds are used to pay down debt
Enhances free cash flow by eliminating CapEx for property maintenance
Supports EBITDA-based lending covenants, since rent is below-the-line

“CFOs are increasingly incentivized to produce agile, asset-light balance sheets,” said Miriam Chang, analyst at Real Estate Partners. “Sale-leasebacks directly support this by decoupling real estate ownership from operational control.”

3. Preserving Operational Control

Unlike a sale or relocation, sale-leasebacks ensure continuity. The lease is structured to reflect the company’s operational needs—typically 10–25 years in duration, with renewal options, purchase rights, and maintenance provisions.

This long-term lease gives executives control over:

Facility access and layout
Location branding
Workforce consistency
Equipment and logistics flow

In some cases, companies negotiate build-to-suit sale-leasebacks, where the real estate is customized and then immediately sold with a leaseback agreement, combining the benefits of tailored development with immediate liquidity.

4. Favorable Valuations and Cap Rate Compression

In the right markets, sale-leaseback transactions can command a premium. Why? Because many investors—especially REITs and infrastructure funds—see leased corporate property as stable, bond-like income.

This demand leads to:

Compressed capitalization rates (cap rates), boosting the sale price
Predictable lease revenue streams for the buyer
Strong credit tenant ratings, increasing property value

CFOs with solid financials and strong occupancy needs can leverage their own creditworthiness to raise capital at valuations above what their asset would fetch in a fire sale or open market.

5. Alternative to Dilutive Capital Raises

For public companies or PE-backed firms, sale-leasebacks offer a non-dilutive alternative to raising capital. Selling stock in a volatile market can erode valuation and weaken shareholder confidence. Issuing debt can create restrictive covenants or hurt credit ratings.

In contrast, a sale-leaseback:

Keeps ownership intact
Doesn’t impact control or board structure
Avoids interest expense or dividend commitments
Can be executed faster than traditional capital raises

“We were evaluating a convertible note to fund our new line,” said Daniel Cho, CFO of a consumer packaging firm. “But after a portfolio review with CBRE, we realized that a sale-leaseback of our manufacturing site covered the capital needs—no equity dilution, no lender oversight.”

6. Real Estate Is Not a Core Business

Many executives have come to a simple realization: they’re not in the business of owning real estate. A software company, distributor, or manufacturer derives its core value from product development, logistics, or brand—not the appreciation of land.

By outsourcing ownership to institutional landlords who specialize in property management, companies can focus on:

Growth
Innovation
Talent acquisition
Customer experience

And with real estate markets being cyclical, offloading ownership risk to investors creates insulation from downturns in commercial property valuations.

Case Study: Mid-Market Industrial Manufacturer

CBRE recently advised a $75M revenue industrial component supplier in the Midwest. The company owned a 90,000-square-foot production facility purchased two decades ago. The land had appreciated significantly, but maintenance costs and facility upgrades were starting to erode cash flow.

Sale-Leaseback Strategy:

Sale Price: $14.5M (20% above appraised value due to market demand)
Lease Term: 20 years with extension options
Rent: Locked in at below-market rate with escalation cap
Capital Use: $8M debt reduction, $6.5M expansion into new product lines

Outcome:
The company reduced its leverage ratio by 1.2x, increased ROIC by 400bps, and gained flexibility to enter new markets—all while continuing operations uninterrupted.

Challenges and Considerations

While sale-leasebacks can be powerful, they’re not without risks:

Lease obligations become a fixed cost that must be serviced
Companies lose future appreciation upside
Negotiation terms require legal and financial precision
If poorly structured, leasebacks can constrain exit or M&A flexibility

CFOs are advised to engage with experienced real estate advisors, tax specialists, and corporate counsel to structure favorable terms and account for long-term scenarios.

A Tool for the Modern CFO

The increasing adoption of sale-leasebacks reflects a broader trend: finance leaders are treating real estate as a strategic lever, not a sunk cost. When executed with foresight and discipline, sale-leasebacks offer capital infusion, risk reduction, and operating continuity—without sacrificing control.

In a world of tighter credit and higher expectations, unlocking value from the walls around you may be one of the most overlooked forms of corporate finance.