What is a sale-leaseback and what strategic benefits can it offer a seller?

• A. Seller sells the property to an investor and leases back; frees capital while maintaining occupancy
• B. Seller leases space from investor and then buys it back at a premium
• C. A sale-leaseback in which the lessee buys the property
• D. A sale-leaseback is used to accelerate depreciation

Answer: (A)

Sale-leaseback means the owner sells the property to an investor and immediately signs a long-term lease to continue using the space. The business thus converts a real estate asset into cash while keeping the same location and operations.

This setup frees capital that was tied up in the owned property, which the seller can redeploy for growth, debt reduction, or other investments. It also improves liquidity and financial flexibility, since the real estate is no longer a major owned asset on the balance sheet and the business gains predictable occupancy costs through the lease. The organization can maintain occupancy at the same site, preserving operations, customer relationships, and day-to-day continuity. Depending on the lease terms, some property responsibilities may shift to the landlord, and lease payments are typically deductible as operating expenses, though the seller loses depreciation on the property because they no longer own it.