Sale-Leaseback

A sale-leaseback is a deal where a business sells a property it uses and immediately leases it back from the buyer, usually on a long net lease. The price is set by dividing the agreed rent by a cap rate, so the seller controls value through the rent it agrees to pay.

If a business agrees to $40,000 a year of triple net rent and a buyer accepts a 6.5% cap rate, the sale price is about $615,000. A higher rent means a higher price, but also a higher ongoing cost to the tenant. The tenant's credit is what buyers are really pricing.

For the buyer, the investment behaves like a bond secured by real estate. The cap rate reflects the tenant's credit, the lease length and what the building would be worth to another user if the tenant left.