Sale-Leaseback

What Is a Sale-Leaseback?

A sale-leaseback is a financing transaction in which a business sells the commercial property it owns and occupies to an investor or institutional buyer, then immediately signs a long-term lease to remain in the building as a tenant. Nothing changes operationally — the company keeps its address, its signage, and its operations. What changes is the balance sheet: the owner converts 100% of the property’s value into cash while retaining full use of the space.

Sale-leasebacks are best suited to owner-occupiers — manufacturers, medical groups, restaurant operators, logistics companies, retailers — that have significant equity locked in real estate and would rather deploy that capital into their core business than leave it sitting in bricks and mortar. They’re also a popular exit strategy for owners approaching a loan maturity who don’t want to refinance at today’s rates, and for private equity sponsors looking to unlock value from a portfolio company’s real estate.

If a traditional refinance would only free up 65–75% of your property’s value, a sale-leaseback can free up all of it. This guide covers how the structure works, typical requirements, current 2026 pricing (expressed as cap rates), and how to decide whether it beats a conventional refinance for your situation.

What Is Sale-Leaseback?

In plain English: you sell your building and rent it back — in one simultaneous closing.

Key terms you’ll encounter:

• Seller-tenant (lessee): The business selling the property and staying on as the tenant.
• Buyer-landlord (lessor): The investor purchasing the property — often a REIT, net-lease fund, family office, or private investor.
• Triple-net (NNN) lease: The standard sale-leaseback lease structure. The tenant continues paying property taxes, insurance, and maintenance — just as it did as owner.
• Cap rate: The initial annual rent divided by the purchase price. This is the sale-leaseback equivalent of an interest rate. A property sold for $5 million at a 7.5% cap rate carries $375,000 in first-year rent.
• Rent escalations: Contractual annual or periodic rent increases, typically 1.5–3% per year or CPI-linked.
• Lease term: Usually 10–25 years initial term, plus renewal options.

Unlike a mortgage, a sale-leaseback is not debt. There’s no principal balance, no amortization schedule, no personal guarantee of a loan, and no balloon maturity. Your obligation is the rent, and your “cost of capital” is the cap rate plus escalations.

How Sale-Leaseback Work

A sale-leaseback closes as two simultaneous documents: a purchase and sale agreement and a lease. The economics of both are negotiated together, and the tradeoffs between them define the deal.

Structure and pricing. The buyer underwrites the transaction primarily on the strength of the tenant’s business (its credit) and secondarily on the real estate. Purchase price and cap rate move inversely against lease terms: a longer lease, stronger corporate guarantee, and higher escalations support a higher purchase price at a lower cap rate. A short lease or weak financials pushes the cap rate up and the price down.

Term and escalations. Initial lease terms typically run 10–25 years, with 15–20 years being the institutional sweet spot. Rent escalates on a fixed schedule — commonly 2% annually or 10% every five years — which functions like a floating cost of capital that only floats upward, on a known schedule.

No amortization, no balloon. This is a fundamental difference from mortgage debt. A conventional commercial loan amortizes over 20–30 years with a balloon due in 5–10 years, exposing you to refinance risk at maturity. A sale-leaseback has neither: rent is a pure occupancy cost with no principal component, and there is no maturity event forcing you back to the capital markets. The flip side is that you’re not building equity — at lease end, you own nothing.

Rate type equivalent. Because rent and escalations are fixed by contract, a sale-leaseback behaves like ultra-long-term fixed-rate financing — 15–20 years of locked economics, which no conventional bank loan and few CMBS loans can match.

Repurchase options. Some deals include a right of first refusal or a fixed-price repurchase option, though buyers resist these because they can jeopardize the buyer’s tax treatment and reduce residual value. Expect to pay for optionality if you want it.

Sale-Leaseback Requirements

Because the buyer is underwriting your business as a tenant rather than your property as loan collateral, the requirements look different from a mortgage — but rough equivalents exist.

Criterion	Typical Range
Proceeds vs. property value	90–100% of appraised fair market value (vs. 65–75% LTV on a refinance)
Rent coverage ratio (EBITDAR ÷ rent)	1.5x–3.0x+ preferred; below 1.5x prices at higher cap rates
Lease term	10–25 years initial, NNN structure
Tenant financials	3 years of statements; profitability or clear path to it
Corporate/personal guarantee	Corporate guarantee standard; personal guarantees for small operators
Property types	Industrial, retail, medical, office, restaurant, self-storage, special-purpose
Minimum deal size	~$1M for private buyers; $5M+ for institutional

A few notes on eligibility:

• Rent coverage is the DSCR of the sale-leaseback world. Where a mortgage lender wants a 1.20x–1.30x debt service coverage ratio, a net-lease buyer wants your business’s earnings (EBITDA plus current rent, i.e., EBITDAR) to cover the new rent 1.5x to 3x. You can sanity-check your property’s income coverage with our DSCR calculator before approaching buyers.
• Fungibility matters. A generic warehouse or medical office building will price better than a highly specialized plant, because the buyer’s downside scenario is re-leasing the building without you.
• Documentation typically includes 3 years of business financials, interim statements, property condition and environmental reports (Phase I), an appraisal or broker opinion of value, and organizational documents. Existing mortgage debt is paid off at closing from sale proceeds.

Current Sale-Leaseback Rates

Sale-leaseback pricing is quoted as a cap rate, not an interest rate. As of 2026, typical ranges by tenant and asset profile:

Profile	Cap Rate Range
Investment-grade corporate tenant, 15–20 yr lease	6.0% – 7.0%
Strong regional operator, healthy coverage	7.0% – 8.0%
Middle-market / non-rated tenant	7.5% – 8.75%
Weaker credit, specialized property, or short lease	8.5% – 10.0%+

Remember to add escalations when comparing to loan pricing: a 7.25% cap rate with 2% annual bumps has an effective cost of capital in the low-to-mid 8% range over a 10-year hold — but on 100% of value, not 70%.

Factors that move pricing:

• Tenant credit — the single biggest driver. Rated credits can trade 150–250 bps tighter than unrated operators.
• Lease term and escalations — longer terms and richer bumps compress the cap rate (raising your sale price).
• Property type and location — industrial and medical currently price tightest; specialized or rural assets price widest.
• Treasury yields and net-lease market spreads — cap rates track long-term rates with a lag.
• Unit-level performance — for multi-site operators (restaurants, clinics), buyers underwrite each location’s four-wall EBITDAR.

These are market ranges, not quotes. Actual pricing depends on your financials, property, and buyer competition — which is exactly why running the deal past multiple capital sources matters.

Pros and Cons

Pros	Cons
100% of property value in cash — vs. 65–75% on a refinance	You give up ownership, future appreciation, and residual value
No debt on the balance sheet; no balloon maturity or refinance risk	Long-term rent obligation (10–25 years) with contractual escalations
Rent is generally fully tax-deductible (vs. only interest + depreciation on a loan)	Capital gains tax due on sale, including depreciation recapture
15–20 years of fixed, known occupancy costs	Effective cost of capital often exceeds senior mortgage rates
Frees capital for expansion, acquisitions, equipment, or debt paydown	Less flexibility to alter, expand, or vacate the property
Underwriting weights business strength, not just LTV	Buyer approval needed for major alterations; assignment/sublease restrictions
Clean exit at today’s value if you believe pricing has peaked	If your business struggles, the rent is still due — landlords are less flexible than lenders

The honest summary: a sale-leaseback is the most expensive way to borrow against your building but the cheapest way to sell it while staying in it. If your business earns returns above the cap rate on redeployed capital, the math works. If the cash would just sit idle, a conventional refinance is usually cheaper.

When to Choose Sale-Leaseback

Best-fit scenarios:

• Your business earns more than the cap rate. A manufacturer earning 20% returns on capital deployed into equipment and inventory should not leave equity trapped in a warehouse yielding an implicit 7%. Selling at a 7.5% cap to fund 20% ROI growth is straightforward arbitrage.
• You’re facing a balloon maturity you don’t like. If your loan matures into a high-rate environment and a refinance would only return 70% of value at a painful rate, a sale-leaseback pays off the debt, eliminates future refinance risk, and puts the remaining 25–35% of equity in your pocket. Our commercial mortgage refinancing guide walks through the refinance side of that comparison in detail.
• M&A and private equity transactions. Sponsors routinely execute sale-leasebacks at acquisition to reduce the equity check — the real estate often sells at a lower cap rate (higher multiple) than the business itself trades for.
• Franchise and multi-unit expansion. Restaurant and retail operators recycle capital from existing stores into new locations.
• Succession and estate planning. Owners nearing retirement convert an illiquid building into distributable cash while the operating company continues under a lease.

When it’s the wrong tool: if you need capital for only 12–36 months, commercial bridge loans preserve your ownership and upside; if you want maximum long-term fixed-rate leverage while keeping the asset, a CMBS or conventional refinance at 65–75% LTV is usually cheaper. Run both scenarios through our commercial mortgage calculator — compare the loan payment on a 75% LTV refinance against the rent on a 100%-of-value sale-leaseback and look at the after-tax difference.

How to Apply

RefiLoop matches owner-occupiers with sale-leaseback buyers and, in parallel, refinance lenders — so you can see both options priced side by side before committing to either.

1. Tell us about your property and business (10 minutes). Property type, location, estimated value, current debt, and topline business financials. No hard credit pull to see initial options.
2. Get matched and receive indicative pricing (2–5 days). We circulate your profile to net-lease buyers and lenders in our 7,000+ lender and capital-source network and return indicative cap rates, purchase prices, and competing refinance terms.
3. Select terms and go under contract (1–2 weeks). Negotiate purchase price, lease term, escalations, and any repurchase or expansion rights. Sign the PSA and lease forms together — never separately.
4. Due diligence and closing (30–60 days). Appraisal, Phase I environmental, property condition report, title, and lease finalization. Existing debt is paid off at closing and net proceeds are wired to you. Use our document checklist to assemble financials, tax returns, and property reports up front — prepared sellers routinely close 2–3 weeks faster.

Ready to see what your building is worth — and what it would cost to stay in it? See If You Qualify and get competing sale-leaseback and refinance quotes with no obligation.

Frequently Asked Questions

What are current Sale-Leaseback rates?

Sale-leaseback pricing is quoted as a cap rate rather than an interest rate. As of 2026, most transactions price between roughly 6.0% and 10.0%, with strong-credit tenants on long leases at the low end and non-rated operators or specialized properties at the high end. See the rates section above for the full breakdown — actual pricing varies by property, borrower strength, lease terms, and market conditions.

How long does Sale-Leaseback take to close?

Most sale-leasebacks close in 45–90 days from signed letter of intent, driven by appraisal, environmental, and lease negotiation timelines. Institutional buyers with committed capital can move faster; complex multi-site portfolios take longer. See the application process section above for the step-by-step timeline.

What credit score do I need?

There’s no hard minimum, and 680+ is typical for conventional financing comparisons — but commercial real estate capital is primarily asset- and cash-flow-based. In a sale-leaseback specifically, buyers underwrite your business’s rent coverage (EBITDAR to rent) and the property’s re-leasing prospects far more heavily than personal credit. Strong business cash flow can outweigh a mediocre score.

What’s the maximum LTV on a sale-leaseback?

The concept translates to 90–100% of appraised value in cash proceeds — because you’re selling the asset outright, not borrowing against it. Compare that with 65–75% LTV on a typical commercial refinance. The tradeoff is that you no longer own the building.

Can I get out of the lease early or buy the property back?

Early termination rights are rare — buyers are purchasing your rent stream and price the deal on lease term. Some transactions include a right of first refusal or fixed-price repurchase option, but these must be negotiated up front and typically cost you in price or cap rate. Assignment and sublease rights are more commonly negotiable.

Do I still pay taxes, insurance, and maintenance after selling?

Usually yes. Nearly all sale-leasebacks use a triple-net (NNN) lease, under which you continue paying property taxes, insurance, and maintenance just as you did as owner. Your total occupancy cost is rent plus those pass-through expenses — factor both into any comparison against a mortgage payment.

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Every sale-leaseback ultimately comes down to one comparison: what a buyer will pay for your building versus what a lender will lend against it. RefiLoop’s marketplace lets you run that comparison for real — submit one profile and receive competing quotes from our network of 7,000+ lenders and net-lease capital sources, with no cost and no obligation. See If You Qualify today and make the decision with real numbers in hand.