Advertisement

Sale and leaseback

A sale and leaseback arrangement can be a useful way for a company to generate cash from its property portfolio without having to vacate.

A sale and leaseback arrangement can be a useful way for a company to generate cash from its property portfolio without having to vacate, as would be the case in a standard sale.

The seller gets a lump sum up front from the 'sale', which can be invested elsewhere, but simultaneously signs a rental agreement- the 'leaseback' - committing to make lease payments to the buyer in return for continued occupancy.

Advertisement - Article continues below

If selling a building and then continuing to use it sounds too good to be true then it probably is. Over time, the high fixed cost of the lease payments will eat into future profits- creating what analysts call high 'operational gearing' - and eventually, depending on the terms of the deal, the seller may lose legal title to the property once the lease period expires.

Advertisement
Advertisement

Recommended

Visit/glossary/bonds
Glossary

Bonds

A bond is a type of IOU issued by a government, local authority or company to raise money.
19 May 2020
Visit/spending-it/glossary/601300/quantitative-investing
Glossary

Quantitative investing

Quantitative investing uses sophisticated computer-based mathematical models to identify and carry out trades.
8 May 2020
Visit/glossary/quantitative-easing-qe
Glossary

Quantitative easing (QE)

Quantitative easing (QE) involves electronically expanding a central bank's balance sheet.
8 May 2020
Visit/glossary/600702/emerging-markets
Glossary

Emerging markets

An emerging market is an economy that is becoming wealthier and more advanced, but is not yet classed as "developed".
24 Jan 2020

Most Popular

Visit/investments/commodities/industrial-metals/601401/money-printing-infrastructure-base-metals-copper
Industrial metals

Governments’ money-printing mania bodes well for base metals

Money is being printed like there is no tomorrow. Much of it will be used to pay for infrastructure projects – and that will be good for metals, says …
27 May 2020
Visit/economy/eu-economy/601422/heres-why-investors-should-care-about-the-eus-plan-to-tackle-covid-19
EU Economy

Here’s why investors should care about the EU’s plan to tackle Covid-19

The EU's €750bn rescue package makes a break-up of the eurozone much less likely. John Stepek explains why the scheme is such a big deal, and what it …
28 May 2020
Visit/investments/funds/601385/in-support-of-active-fund-management
Funds

In support of active fund management

We’re fans of passive investing here at MoneyWeek. But active fund management has its place too, says Merryn Somerset Webb.
25 May 2020