What is a 'leaseback' transaction?

In a leaseback transaction, the original owner of the property sells it to another party and then immediately enters into a lease agreement with the new owner to continue occupying the property. This arrangement allows the seller to access capital from the sale while retaining the use of the property, which is often essential for their business operations. This structure can be particularly advantageous for companies that need to free up cash while maintaining their operational space.

By continuing to lease the property, the seller can avoid disruption to their business, as they remain in the same location. This arrangement also potentially provides the new owner with a consistent income stream from the lease payments. In a nutshell, it enables liquidity for the seller while simultaneously offering financial stability for the buyer through rental income.