Sale and leaseback
The sale-leaseback technique is the sale of an interest in realty and the subsequent leasing back of that same real estate. We can illustrate this with an example.
Johns owns an office building. The business is growing rapidly and John is looking to expand. Since he owsn that real estate and the business John decides to sell the property, land and the building, so he can generate capital so he can lease the property back.
This technique technique is very effective in generating capital from real estate, hwen the actual use of the real estate is more important than the ownership. It can also be used to entice the buyer into making a transaction as he or she knows that he will already have an existing tenant. The form of financing starts with a sale and then the seller agrees to leaseback the property which is being sold. The sale-leaseback is a technique that allows the seller to generate capital by selling the real estate but also allows the seller to maintain the use of the property.
The property being sold is usually all of the property. this means that ican be land and buildings, or it may be just the buildings or just the land.
How is the the Sale and Leaseback Structured
A basic version of the sale and leaseback is when the land is the only subject of the leaseback. It is quite prevalent in many parts of the world to have the leased land under many types of buildings.
