A sale and leaseback is primarily used for what purpose?

A sale and leaseback arrangement primarily serves the purpose of raising capital for owners. In this transaction, a property owner sells their property to an investor but simultaneously enters into a lease agreement to continue occupying the property as a tenant. This structure allows the original owner to unlock the equity tied up in the real estate asset, converting it into cash. The company can then utilize this capital for various purposes such as reinvesting in their business, paying off debts, or funding other operational expenses.

This strategy is particularly appealing to businesses that need funds for growth but want to maintain their operational space without the burden of ownership. By doing so, they can improve liquidity and maintain operational continuity. The leaseback typically allows the seller to continue using the property while also providing the buyer with a steady income stream from the rent paid.

While other choices may appear relevant, they don't reflect the primary reasoning behind sale and leaseback transactions. For instance, increasing rental income pertains more to property management and investment strategies rather than the sale and leaseback structure itself. Retaining ownership contradicts the idea of a sale; and while such arrangements may offer tax advantages, that is not the primary motivation behind the transaction.