A real estate sale leaseback is an agreement made between two companies on a specific piece of property that gives one company land and a large influx of capital, and the other company a guaranteed continuous income from lease payments for a certain period of time, which can be useful under certain situations.
A real estate sale leaseback might begin with company already owning a piece of property, or buying up a new piece of property. This company sells this piece of property to a second company, obtaining an immediate and large amount of capital. This capital can then be used to invest into the business’s structure, whether for hiring employees, buying equipment, pursuing a growth opportunity, or other purposes. Once this is done, the second company, which bought that piece of property, leases it back to the first. The first is in this way able to continue using the piece of property for the lease term. The capital it obtained from the sale could be used in order to make the lease payments, and it could also come from money the first company continually brings in as a result of having its property still available for operations. Companies that have fallen on monetary woes can use this setup in order to stay in business and get enough money to make a turnaround.
In addition to receiving to having continuous income from lease payments, the contract agreement may also include other advantages for the lessor resulting from the real estate sale leaseback, such as discounted or free services or products, or perhaps a certain amount of additional income above lease payments.
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