A sale and leaseback agreement is a financial transaction where a company sells an asset to a buyer or lessor and immediately leases it back, retaining the right to use the asset while transferring ownership. This arrangement is a strategic tool for companies seeking to unlock capital tied up in high-value assets without disrupting their operations. It is commonly employed for real estate, aircraft, and ships.

The primary advantage of a sale and leaseback agreement is the immediate infusion of cash, providing liquidity to the selling company. This capital can be redirected toward other business needs, such as expansion, debt reduction, or operational investments. Additionally, the seller relinquishes the responsibilities associated with ownership, including maintenance and depreciation, transferring these complexities to the buyer-lessor.

While sale and leaseback arrangements offer significant short-term financial benefits, they also introduce long-term rental obligations. Companies must carefully evaluate these commitments to ensure the lease payments align with their economic strategy. Over-reliance on such agreements can strain future cash flows and limit financial flexibility.

These agreements benefit both parties. Sellers benefit from enhanced liquidity and operational flexibility, while buyers secure a steady rental income from a reliable tenant. The buyer also gains ownership of a valuable asset whose value might appreciate over time, making it an attractive investment opportunity.

Sale and leaseback agreements provide a balanced solution for unlocking capital while maintaining access to essential assets. Still, they require careful evaluation of long-term financial implications to ensure sustainable value creation.