What is a sale and leaseback transaction?

A sale and leaseback transaction is a financial arrangement where an owner sells an asset, typically real estate, and simultaneously enters into a lease agreement to continue using that asset. This transaction allows the original owner to free up capital while still maintaining operational access to the property.

The primary benefit of this type of transaction is that it provides the seller with immediate liquidity while allowing them to retain use of the property for ongoing business operations. This can be particularly advantageous for companies looking to improve their balance sheets or reinvest the proceeds from the sale into other areas of their business.

The other options do not accurately describe a sale and leaseback transaction. For instance, taking out a second mortgage is a separate financing method. Selling without leasing does not involve the retention of property usage post-sale, and acquiring new assets without selling old ones does not relate to the concept of sale and leaseback, as it solely focuses on property transactions without retention of use.