Sale-Leasebacks Surge As Companies Eye Ways To Raise Cash

More companies are becoming tenants in properties they previously owned in a bid to extract fast cash from their real estate.

Despite continued economic uncertainty plaguing the real estate sector, businesses are still finding creative ways to raise capital. Stabilizing interest rates and an increase in M&A have helped bring about a resurgence of sale-leaseback activity, in which a company sells a property and then leases it back from the buyer. 

“The stock market’s hitting new records all the time, so it is a weird environment we’re in,” said Scott Merkle, managing partner of SLB Capital Advisors. “The things that directly impact our world are interest rates. And also M&A activity. We are in a very conducive environment for sale-leaseback activity.”

A sale-leaseback deal lets a company reap the value of its property, and at the same time allows the buyer to obtain immediate cash flow with the seller's lease.

Last year, companies engaged in about 714 sale-leaseback transactions worth around $14.4B, exceeding the 2024 level by 3% and the dollar amount by 18%, according to a fourth-quarter report by SLB. 

And that momentum is mounting. There were 168 sale-leaseback deals in the first quarter of this year, the highest Q1 volume since 2022. The leading deals last quarter include Gaming & Leisure Properties’ $700M purchase of Bally’s Twin River Casino Resort and Essential Properties’ $146M acquisition of 69 Denny’s eatery locations.

A rise in M&A activity is one of the primary contributors of sale-leaseback deals. When a company buys another, it sometimes will sell off its owned real estate assets to reap immediate cash back in the overall transaction.

Last month, New York-based REIT W.P. Carey bought 43 manufacturing facilities in 24 states from GardenCore for an undisclosed sum. The purchase followed Pacific Avenue Capital Partners' acquisition of GardenCore, formerly Oldcastle Lawn & Garden Inc., for more than $1.1B in April.

In turn, Pacific Avenue re-leased the facilities back from W.P. Carey for 20 years with fixed annual rent increases, according to a press release.

“As M&A activity rises, we are well positioned to support private equity firms in unlocking significant capital through sale-leasebacks of portfolio-company real estate,” W.P. Carey Executive Director Jason Patterson said in an emailed statement this week.

Last year, companies spent $4.9T in M&A deals, the second-highest year on record, according to Bain & Co. That level was reached despite a wave of economic uncertainty buffering commercial real estate investment in general — from the conflict in the Middle East to escalating inflation, according to Merkle.

“A lot of sale-leasebacks happen around M&A,” he said.

But M&A is not the only reason.

For some companies, selling properties is a way to raise cash to plug corporate capital needs, said Elizabeth Hale, the founder of eeCPA, a Scottsdale-based CPA firm with a list of high net worth and small-business owners as clients. Unloading properties allows companies to get the real estate off their books while using the cash to expand their business.

“Motivation is to cash it out. It used to be an advantage to hold for appreciation,” Hale said. “If they sell them separately, a lot of times they can realize more cash. It’s also easier sometimes to uncouple them for certain liquidation purposes.”

Lukas Huberman, vice president and director of acquisitions at BLT Enterprises, said he has seen that motivation as well. Some companies view selling and leasing back their real estate as a way to raise capital without having to secure loans and hobbling balance sheets with debt. 

“A sale-leaseback can make a company’s business look like it’s performing very well,” Huberman said.

Some small-business owners are approaching retirement and see sale-leasebacks as a way to enhance personal wealth, Hale said. President Donald Trump’s tariffs have also exacted a toll on smaller businesses, forcing some owners to turn to these deals to help raise capital, she said. 

In February, Ryan Burke, first vice president of real estate brokerage firm Matthews, helped a physician sell and lease back a portfolio of nine Legacy Brain & Spine locations in Metro Atlanta to investors for $26M.

“It really was his personal long-term exit, which is probably 95% of the reasons for physician exits," Burke said. 

At least on the medical side, sale-leasebacks have their critics.

Last October, Sens. Ed Markey, Bernie Sanders and Richard Blumenthal introduced legislation that aims to place guardrails on sale-leasebacks with REITs.

The bill would bar healthcare systems from entering into a lease or sale arrangement with a REIT that could "weaken the financial status of the health system." It was unveiled after several deals led to financial instability and closures for some hospitals. The measure has yet to see action.