Sale-Leaseback

A sale-leaseback is a two-part transaction: a business sells an asset it owns — almost always real estate — to a buyer, and simultaneously signs a long-term lease to continue occupying and using it. The seller gets a lump of cash; the buyer gets a stabilized, income-producing asset with a built-in tenant. For business buyers, it can be the tool that finances an entire acquisition.

How it works in an acquisition. Imagine a manufacturing company listed for $2 million. The seller owns the building outright — it’s worth $800,000. You don’t have $2 million. So you structure it: a real estate investor buys the building for $800,000, your LLC buys the operating business for $1.2 million (with seller financing or an SBA loan), and the business signs a 10-year lease with the new building owner. You just bought a $2 million enterprise for the price of the business-only portion, using the real estate to finance itself.

Acquisition via Sale-Leaseback (illustrative)

Line item	Amount
Total asking price (business + building)	$2,000,000
Building sold to RE investor	$800,000
Business purchased by you	$1,200,000
Annual lease payment (NNN, 10-year)	~$64,000 (8% cap rate)
Business SDE after lease	Must exceed lease + debt service + profit

✦

A sale-leaseback is most powerful when the seller wants to retire and the business has valuable real estate they wouldn’t otherwise finance. You bring in a separate capital partner for the property, the seller gets cash for their building, and your acquisition target just became 40% cheaper.

For the full strategy and structuring details, see sale-leaseback.

Appears in these guides