6 Reasons Why Alternative Financing is a Hot Topic for CFOs
As financial stressors make cash difficult to secure, alternative financing methods such as sale-leasebacks become more attractive
In today’s fast-changing environment, CFOs are increasingly focused on transformation and strategically positioning their organization for future success. However, serious financial stressors are making that job difficult, as cash is more difficult to secure. To ensure their business is set up to succeed, CFOs are investigating alternative sources of capital.
One such alternative is a sale-leaseback, where a business sells its real estate to an investor for cash and simultaneously enters into a long-term lease. Many predict alternative financing methods, such as sale-leasebacks, will grow in popularity over the next year. Here are six reasons why:
Climbing Interest Rates
The Federal Reserve hiked interest rates throughout 2022 to tame inflation. This trend is likely to continue in 2023, with the Fed raising interest rates for the 10th time in a row in May in its ongoing efforts to curb inflation.
High interest rates make traditional loans expensive and hard for some companies to secure, particularly those that are sub-investment grade. It also makes refinancing more challenging, putting CFOs with debt coming due in a difficult position. The logical option is to find alternative avenues to secure capital to pay near-term debt and create growth opportunities for the future.
Inflation Remains High
Although inflation has begun to cool, the annual rate as of April 2023 is 4.9%, much higher than the Fed’s target of 2%. As a result, the price of commodities, raw materials and labor remains high, forcing most businesses to eat into their savings to stay afloat. For CFOs looking to develop capital-raising strategies that will provide cash without putting an intense strain on their business, alternative financing methods such as a sale-leaseback are a great option.
Looming Possibility of Recession
The World Bank has been slashing earlier economic growth figures it had projected, indicating that we may be headed into a recession in the coming months. Global economic growth had been initially projected at 3% but was later reduced to 2%.
This reflects the third weakest pace of growth in nearly thirty years, exceeded only by the global recessions caused by the pandemic and the global financial crisis.
A recession is extremely difficult on businesses, and often results in significant declines in sales and profits, layoffs, slashed capital spending and restricted financing access. If that's where the economy is headed, the best way for CFOs to prepare is to start looking for alternative financing to increase cash flows and bolster their balance sheets to weather the storm.
The Talent War Continues
The great resignation took the war for talent to a higher level as labor shortage became rampant, and the skills gap widened even further. Companies are being forced to reskill or upskill to meet current demands.
Training magazine shows this data that reveals why reskilling is essential:
- 57% of US workers want to update their skills, and 48% would consider switching jobs.
- 71% of workers say job training and development increase their job satisfaction.
- 61% say upskilling opportunities are an essential reason to stay at their job.
- 94% of workers would stay at their company if their company invested in their careers.
Reskilling takes financing. With the average cost to reskill an employee standing at $24,800, coming up with an actionable capital-raising strategy is critical.
Increased Customer Expectations
The great resignation took the war for talent to a higher level as labor shortage became rampant, and the skills gap widened even further. Companies are being forced to reskill or upskill to meet current demands.
- Fast solutions to customer complaints
- Access to preferred service channels
- Opportunities to answer questions themselves through help centers
- Hyper-personalized experiences
- Data protection and privacy
Growing or staying in business is impossible if you can't meet these needs. Recent reports show companies have already begun investing in stellar customer experiences, with those investing in omnichannel experiences jumping from 20% to more than 80%.
Also, 84% of companies are focusing on improving mobile customer experience. Because improving customer experience means investing in tech, spending will increase, requiring CFOs to come up with intelligent ways to shore up extra capital.
Accelerated Digital Transformation
Beyond the rampant use of AI, other disruptive technologies such as blockchain, the cloud and IoT are becoming more common and interdependent in improving business functions.
These technologies are not static either but are continually evolving, creating the need for businesses to rethink their structure and ensuring employees across all levels can keep up with the technology.
Despite the potential recession and tough economic times, developing solid digital strategies and reviewing existing tools and processes for efficiency gaps will help create a unified approach to digital transformation. As with other processes, transformation requires cash, so CFOs will likely turn toward alternative financing strategies to unlock the capital needed.
Final Word
2023 is full of headwinds for CFOs, which will require businesses to explore unique capital strategies to ensure they have the cash needed to succeed. At W. P. Carey, we specialize in sale-leasebacks and work with CFOs to help them monetize their real estate and redeploy that capital back into their businesses. Particularly in today’s economic environment, CFOs will likely find that the rate at which they can monetize their real estate through a sale-leasebacks is more attractive than the current long-term borrowing rate.
With significant dry powder, 50 years of experience and the ability to provide certainty of close, W. P. Carey is poised to deliver much-needed capital for companies interested in exploring sale-leasebacks. Contact us today to find out if your company and real estate are a good fit!
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Sale-leasebacks Earn a Bigger Role in Capital Strategies
Corporate operators and private equity sponsors are increasingly using sale-leasebacks in their capital strategies, whether to fund acquisitions, manage costs, or improve their balance sheet position. When companies own significant real estate, this structure provides access to the full property value without disrupting operations, says Zachary Pasanen, managing director and co-head of North American investments at W. P. Carey. "Companies often have significant capital tied up in real estate, so a sale-leaseback allows them to monetize the real estate fully, lock in a very long-term contract, and fix their rent for a sustained period of time," Pasanen says, adding that proceeds are commonly used to shore up balance sheets, fund growth initiatives, pay down expensive debt, or address near-term obligations coming due. As more companies weigh their options for unlocking the value of their real estate, the structure's appeal comes down to how well it fits broader capital goals. Private Equity Sponsors Find Value in the Multiple Gap Private equity firms have become steady users of sale-leasebacks to finance corporate acquisitions, Pasanen notes. This structure provides an opportunity to capture value from the gap between the real estate multiple and the acquisition multiple. "You can often find strong accretion by utilizing the sale-leaseback," Pasanen says. He adds that prudent CFOs and sponsors are factoring it into M&A strategies as an additional way to capitalize acquisitions. Corporate operators are also using this structure for other balance sheet purposes. For example, companies looking to pay down near-term or expensive debt may apply sale-leaseback proceeds while maintaining operational control of their facility. "The way we structure a lease gives them effectively the same controls they had when they owned the facility," Pasanen says. He explains that tenants can make alterations within reason, and they remain responsible for taxes, maintenance and insurance, much as they were before the deal closed. Pasanen also notes that W. P. Carey is a long-term capital partner to its tenants and can support their real estate needs as they evolve, with the ability to finance expansions, renovations or energy retrofits at their leased properties. Capital Flows In as Appetite Stays Strong Companies holding real estate often find the structure attractive because it helps them unlock a property's full market value. Pasanen notes that mortgage financing, by contrast, typically returns around 50 to 70 cents on the dollar. Corporate demand for sale-leasebacks is met by a market with no shortage of capital supporting it. Pasanen expects the sale-leaseback market to remain active, noting that a growing pool of investors are entering the space. For specialized facilities where tenants have invested heavily and relocation is expensive, Pasanen says investor demand remains particularly strong. This suggests the structure will remain a viable option, particularly for companies whose real estate is critical to their operations.
Sale-leasebacks: A Flexible Capital Solution Across the M&A Lifecycle
As private equity firms continue to navigate a dynamic M&A environment, access to capital is critical. One increasingly important tool in their toolkit is the sale-leaseback. By unlocking capital embedded in real estate, sale-leasebacks can support transactions at multiple stages of the deal lifecycle – from acquisition financing to post-close optimization. Below, we explore how private equity sponsors are leveraging sale-leasebacks both at the point of acquisition and after closing, with a recent transaction serving as a practical example. Strengthening the Capital Stack at Acquisition In competitive M&A processes, particularly in corporate carveouts or complex platform acquisitions, certainty of financing and speed of execution are critical differentiators. Sale-leasebacks can play a key role at this stage by serving as a complementary capital source within the transaction structure. Rather than relying solely on traditional debt or equity, private equity firms can incorporate a sale-leaseback to monetize a target company’s owned real estate as part of the acquisition financing. Because land and buildings tend to sell at higher valuations than the company itself, private equity firms can sell portfolio company real estate and rent it back under a long-term lease, thereby capturing a multiple arbitrage and blending up their initial purchase price multiple without necessarily contributing more equity themselves. Using a sale-leaseback at closing serves a number of benefits, including: Providing immediate funds to aid in maximizing purchase price to a Seller (and winning an auction) Reducing the required equity investment Lowering overall cost of funds or increasing overall financing duration from traditional financing sources In this way, sale-leasebacks serve not just as a financing tool, but as a competitive edge in winning and efficiently executing complex M&A transactions. Unlocking Value Post-Acquisition While executing a sale-leaseback at closing may often be optimal, for a number of reasons acquirors may prefer to wait until post-closing to pursue a sale-leaseback. Post-acquisition capital can be a way to fund additional acquisitions, repay expensive debt, or invest in incremental equipment or higher ROI opportunities. Once a private equity firm has acquired a business, monetizing owned real estate through a sale-leaseback allows the sponsor to: Recapture a portion of its initial equity investment Reallocate capital toward portfolio company growth initiatives, add-on acquisitions or operational improvements Replace shorter-term debt with long-duration leases with no refinancing risk Post-closing sale-leasebacks offer a number of advantages in optimizing a business where additional capital could be put to better use. Private equity firms can often benefit from evaluating their real estate portfolios to find untapped sources of capital to reinvest in their businesses. Case Study: GardenCore In May 2026, W. P. Carey completed the $400 million sale-leaseback of a 43-property manufacturing portfolio leased to GardenCore, a leading U.S. manufacturer of lawn and garden consumables. The deal was completed in conjunction with a private equity firm’s acquisition of the business as part of a corporate carveout. By incorporating the sale-leaseback into the capital stack, the sponsor was able to unlock value and reduce the acquisition purchase price, illustrating how sale-leasebacks can help facilitate complex M&A deals. A Strategic Lever for Private Equity As M&A activity continues to evolve, sale-leasebacks are increasingly becoming a core component of how private equity sponsors structure and optimize their acquisitions, transforming real estate from a passive asset into a strategic source of capital. With over $6 billion in private equity financing completed since 1973, W. P. Carey remains well positioned to support private equity firms in unlocking significant capital through sale-leasebacks. Get in touch today!
Why Build-to-Suits Are Gaining Momentum in Today’s Market
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