Sale and Leaseback

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What is Sale and Leaseback? Meaning.

A Sale and Leaseback is the sale of one or more assets to a third party that immediately leases it back to the original owner. This financial lease method can be used as a way to improve the financial position of the originating company by offloading assets to a buyer that is presumably interested in making a long-term secured investment. Also tax benefits may be associated with it. It results in a one-off profit benefit which will be reflected in the Operating Profit and Earnings per Share. Furthermore its aim may be to transfer ownership to a holding company while keeping proper track of the ongoing worth and profitability of the asset.

Typical assets involved in a Sale and Leaseback include buildings, apartments, industrial equipment, ships, airplanes, etc. Normally the seller remains in day-to-day operational control of the property.

Some leaseback arrangements allow the seller, or current lessee, the option to buy back the property at a future date. During the life of the leaseback, however, the buyer derives tax benefits from the arrangement, such as being credited for depreciation of the property.

Also called: Leaseback.

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Compare with: EBITDA  |  P/E Ratio  |  Accounts Receivables Financing  |  PEG Ratio  |  Relative Value of Growth  |  Economic Value Added  |  Economic Margin  |  Cash Ratio  |  Current Ratio  |  Earnings Per Share  |  Return on Equity  |  Return on Invested Capital  |  Market Value Added  |  CFROI  |  Fair Value  |  TSR  |  Recapitalization  |  Undercapitalization  |  Working Capital

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