How Private Equity Can Leverage Sale-leasebacks
Tyler Swann of W. P. Carey takes a look at some of the options in this exclusive thought leadership article
Sale-leasebacks are often used by private equity firms to raise capital to support portfolio company growth. Through a sale-leaseback, private equity firms can unlock otherwise illiquid capital tied up in portfolio company real estate and reinvest the proceeds into its core business.
Here’s how private equity firms can leverage sale-leasebacks to generate long-term value:
Maximize portfolio company value by reinvesting sale-leaseback capital into its operations
Following the completion of a sale-leaseback, private equity firms can immediately invest the proceeds into its portfolio company’s business operations to support long-term growth. These include investments in new facilities, technology, equipment, R&D and human capital. The benefit of pursuing a sale-leaseback instead of other debt alternatives is that PE firms can realize 100% fair market value for the portfolio company real estate.
For example, W. P. Carey worked with a middle-market private equity firm on the $19 million sale-leaseback of two industrial facilities leased to a global distributor of plastics. The private equity firm used the transaction proceeds to secure long-term capital to expand portfolio company operations and fund future growth initiatives.
Pay down existing debt and provide portfolio companies with balance sheet flexibility
Private equity firms can use sale-leasebacks as a method to recapitalize and strengthen the credit metrics of their portfolio companies. Particularly for smaller, non-credit-rated companies that cannot access the capital markets, a sale-leaseback is a great tool to provide balance sheet flexibility and enable portfolio companies to pay down maturing debt and other liabilities. By improving the balance sheet, private equity firms can position a portfolio company for a credit upgrade or even an IPO, maximizing the long-term value of the company.
In 2020, W. P. Carey provided a private equity firm $40 million in sale-leaseback financing for a manufacturing facility leased to a global leader in barbecue grills and accessories. Proceeds were used to pay down debt and improve the balance sheet, helping position the company for a positive credit improvement. Shortly after the sale-leaseback, the company completed an IPO raising over $250 million.
Compete more effectively for new acquisitions and M&A
Sale-leasebacks can be used by private equity firms to help finance add-on acquisitions – where a PE firm acquires a new company and mergers it with an existing portfolio company to generate growth. By carving out real estate from a business during or post-acquisition, private equity firms can unlock substantially higher value for the real estate due to the spread between the lower cash flow multiple paid to acquire the business and the much higher cash flow multiple received from the sale of the real estate itself. As a result, sale-leasebacks are a capital-efficient way to maximize portfolio company growth while also serving as a positive arbitrage opportunity for private equity firms.
W. P. Carey worked with a private equity firm on the $29 million sale-leaseback of four industrial facilities leased to a global manufacturer and distributor of vehicle-mounted aerial lifts. Proceeds from the transaction were used to partially fund the manufacturer’s acquisition of a German company in the same industry, enabling them to expand their market share in Europe.
Conclusion
Sale-leasebacks are a highly attractive capital allocation tool with many strategic and financial benefits for sponsored companies. Real estate financing can be an extremely effective way to fund growth and add value to portfolio companies, particularly in today's high-interest rate environment. In order to maximize proceeds, PE firms considering a portfolio company sale-leaseback should work with an all-equity buyer with experience working with all types of credits.
W. P. Carey has partnered with private equity firms and their advisors on these types of transactions since 1973, and has provided over $5.7 billion in capital to PE firms and their portfolio companies. If you’re interested in pursuing a portfolio company sale-leaseback, please contact us at globalinvestments@wpcarey.com.
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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!
Investor Confidence Returns
This year’s EXPO Real in Munich brought together real estate professionals from over 70 countries, eager to assess the market’s trajectory as we head into 2026. After a turbulent stretch marked by volatile interest rates and macroeconomic headwinds, signs of stabilization have surfaced, bringing optimism to the market. Amid this backdrop, three standout themes emerged: Investment Activity Stabilizing After several years of volatility, investment activity is finally stabilizing. According to Savills, European real estate investment volumes reached €130 billion for Q1-Q3 2025, a 1.5% year-over-year increase. This activity is being driven primarily by improving cap-rate spreads, a narrowing price gap between buyers and sellers and a steadier Eurozone backdrop. With a growing number of sizeable assets and portfolios hitting the market – and investor appetite rebounding – we anticipate an uptick in deal volume as we finish out the year and enter 2026. New Sectors Gaining Steam As Europe’s real estate market steadies amid rate cuts, investors are turning toward new growth sectors. At the forefront are data centers, which have surged in popularity due to the exponential rise of AI and cloud services. New energy infrastructure – including real estate tied to renewables and grid modernization – is also attracting capital, driven by the continent’s aggressive decarbonization goals. Meanwhile, student housing is experiencing a renaissance, buoyed by demographic shifts and urban migration patterns. These sectors not only offer strong fundamentals but also align with broader trends shaping the future. Private Equity Embracing Sale-Leasebacks Private equity firms are continuing to turn to sale-leasebacks as a strategic lever to unlock liquidity. By selling real estate assets owned by portfolio companies and leasing them back, PE sponsors can convert illiquid real estate into cash – fueling acquisitions, funding growth initiatives or deleveraging balance sheets. This approach is particularly effective in post-acquisition scenarios, where rapid access to capital is essential but traditional financing may be costly or restrictive. Sale-leasebacks also offer flexibility in structuring, allowing firms to tailor lease terms to match cash flow realities while avoiding equity dilution or covenant-heavy debt.