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.

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.

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022