Private Equity
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.
Sale-leasebacks Gain Momentum as Global M&A Values Grow
Private equity sponsors are rethinking how they access capital as the M&A market heats up. Global M&A values have climbed to $1.89 trillion in the first half of 2025, meanwhile fluctuating interest rates and tighter financing make traditional methods of raising capital less appealing. “The tighter rate environment is a moving target, particularly with the recent rate cut,” says Jason Patterson, executive director of investments at W. P. Carey. “As a general rule of thumb, alternative sources of capital, such as sale-leasebacks, are attractive right now, especially if you’re having trouble securing debt in a more structured transaction.” As firms look to move forward in the current market, many are finding strategic opportunities with sale-leasebacks to tap into capital, both before and after M&A deal closings. Capturing Flexibility Pre- and Post-Acquisition For private equity firms, a sale-leaseback offers flexibility throughout the merger and acquisition process. In the pre-acquisition phase, this strategy helps reduce equity requirements. “This can lower the equity needed to close, which is especially attractive at the start of an M&A deal,” says Patterson. On the post-acquisition side, Patterson notes that a large amount of capital often remains tied up in real estate, and that sale-leaseback proceeds can support new acquisitions, or fund reinvestment in the buildings themselves. Because of this flexibility, Patterson is seeing more sponsors incorporate sale-leasebacks into their regular strategies. Securing Certainty and Speed Patterson stresses that execution speed and reliability are critical when incorporating sale-leasebacks into a strategic playbook. “Having someone you can be certain is going to provide the capital necessary to close that acquisition on time is of the utmost importance,” says Patterson. As an example, he points to a transaction in which W. P. Carey funded more than $400 million at closing for a large pharmaceutical manufacturer. “It took a lot of coordination and trust among the parties,” says Patterson. “But having that certainty was extraordinarily valuable to the sponsor because they didn’t have to call their own capital or raise additional debt to fund the transaction.” Patterson also explains that groups sometimes lack sufficient information about the real estate transaction to even consider a sale-leaseback until they are near closing, which is why having a partner who can move quickly and reliably is important. Putting Proceeds to Work Once a sale-leaseback is completed, the proceeds can be deployed in a variety of ways. Patterson notes that some groups use the capital to grow the business or expand production. In other cases, proceeds might go toward paying down debt when the cost of funds under a sale-leaseback is more attractive than traditional financing. Patterson believes this flexibility could drive wider use of the strategy in future M&A transactions. “Many groups don’t always appreciate [that] they’re literally sitting on some of the most valuable sources of capital they have in the real estate they own,” says Patterson. “And as more become familiar with using sale-leasebacks as a strategy, I think it’s possible that it could increasingly be used in the M&A process.”
How Sale-Leasebacks Help PE Raise Capital in a Tight Market
Funding for growth, refinancing corporate debt, and merger and acquisition activities are top priorities for many private equity firms. A recent PwC report noted that 60% of CEOs plan to make at least one acquisition in the next three years. The report further explains that lower levels of M&A activity during 2023 created “pent-up buyer demand” moving into the current year. However, tapping into capital isn’t always easy when it is locked in assets. “It’s quite inefficient for private equity firms to have capital tied up in real estate assets that aren’t earning for them,” says Tyler Swann, managing director, investments at W. P. Carey. “An alternative is doing a sale-leaseback, which provides a much lower cost of accessing capital than traditional financing methods.” Understanding sale-leasebacks and their advantages can help private equity firms strategically manage growth funding, debt maturities and other capital needs. The advantages of sale-leasebacks With traditional financing strategies such as mortgages, terms are often shorter and exposed to higher market volatility. Accessing capital can also be time-consuming, a challenge for firms that need to move quickly for acquisition deals. That’s not the case with sale-leasebacks, notes Swann. “Sale-leasebacks are very flexible,” says Swann. “The processing time can be as short as 30 to 45 days between the initial call and the actual funding. It’s not unusual for us to get a call from a private equity firm saying, ‘We’re closing on a business in 30 days; can you be there to close with us as acquisition financing?’ And that’s something we can do.” He explains that capital uses also have very few restrictions, with the most common purposes being acquisition financing, dividend payments, and refinancing maturing debt. Misconceptions about sale-leasebacks As private equity firms consider sale-leasebacks, questions often linger regarding who qualifies for this type of financing. Many believe that because their real estate is in a secondary or tertiary market, or their asset doesn’t have a huge value, they won’t qualify. But according to Swann, that’s not necessarily true. “If you have a specialized manufacturing facility in a small market, you may think it won’t qualify because it’s not a high-quality warehouse in a market like Southern California,” says Swann. “Despite where an asset is located, if it’s profitable and contributing to the bottom line of a business, it could be a great candidate for a sale-leaseback.” As the market progresses through 2024, Swann expects sale-leaseback activity to continue upward, partly due to M&A activity and its flexibility to tap into capital quickly. “Every year, sale-leasebacks become a little more accepted in the private equity community as a source of financing,” says W. P. Carey’s Swann. “Ten or 20 years ago, corporate debt was by far the dominant option, but we continue to see an increase in sale-leaseback deals every year.”
Looking into the Crystal Ball
2023 was undoubtedly a challenging year for the net lease sector. High inflation, rising interest rates and other economic uncertainty caused a notable decrease in overall transaction volume, sparking apprehension about the trajectory of the industry. However, there have been some signs of renewed life in the market. Most experts believe we have hit the interest rate peak and expect cuts to be made in 2024. In addition, dealmakers generally anticipate that the M&A environment will improve given the market has stabilized, which could bring more investment opportunities to the market. While no one has a perfect crystal ball about what the future will hold, there are certainly reasons for optimism in 2024. Here are three net lease market predictions for the year ahead. Boost in net lease deal volume fueled by projected interest rate cuts The U.S. Federal Reserve indicated in its latest summary of economic projections that three cuts may be coming in the year ahead. The cuts are expected to be slow and gradual and will be dependent on the state of the economy, but investors reliant on third-party debt are hoping for a much-needed reduction in borrowing costs to remain competitive. The signaling of rate cuts is positive news for the market as it means interest rates have most likely reached their peak. This should help the market stabilize therefore narrowing the bid-ask spread between buyers and sellers, leading to a more active deal environment in 2024. In addition, many investors who have stood on the sidelines in anticipation that there will be more favorable opportunities down the road are likely to start jumping back into the market in 2024 and new entrants are expected to join in. Uptick in private equity sale-leasebacks as M&A surges The dealmaking environment in 2024 is already off to a better start than 2023. Inflation has declined, interest rates have likely reached their peak and private credit has become more widely available for more kinds of deals, while traditional credit markets are starting to improve. Private equity firms are also sitting on an unprecedented amount of dry powder – $2.59 trillion – with mounting pressures to deploy that capital into new investments. As a result, M&A activity is expected to increase in 2024. Along with an uptick in dealmaking, savvy private equity firms are expected to continue looking for alternative strategies for growth given lingering economic and geopolitical uncertainties. One effective strategy is through the sale-leaseback of their portfolio company real estate, which allows private equity firms to unlock immediate capital to redeploy into other initiatives, such as new acquisitions or portfolio company growth. Typically, when M&A activity surges, sale-leaseback opportunities follow, so more private equity-backed real estate deals will likely emerge in 2024. Pandemic office trends remain while industrial holds steady More than three years since the start of the pandemic, the real estate industry has finally accepted that the office sector will not return to the way it was before – and hybrid- and- remote work models are here to stay. As a result, offices have lost much of their appeal for investors, with transactions declining more than twice as much as any other property sector in 2023. W. P. Carey announced its strategic plan to exit office last year, through the spin-off of 59 office properties into Net Lease Office Properties and an office sale program to dispose of the remaining on-balance sheet assets. This trend is expected to continue into 2024 and some office investors will likely start to look for alternative uses for office assets – such as residential or industrial. Industrial, on the other hand, will continue to perform well into 2024, as re-shoring and nearshoring provide a boost to the sector. While the asset class is showing some signs of softening post-pandemic as the need for robust inventory decreases, the long-term outlook remains positive. Moody’s Analytics CRE forecasts that annual rent growth for warehouse and distribution properties will track at approximately 5-6% per year over the next 10 years, suggesting that the sector has moved on from its huge boom into a steadier state of growth.
Private Equity and Sale-leasebacks: Choosing the Perfect Partner
Private equity-backed deal volume has hit its lowest point in four years. Unsurprisingly, the biggest factor contributing to this decline is the high cost of debt due to rising interest rates, which has made private equity deals more expensive. As a result of the challenging capital environment, PE firms are turning to sale-leasebacks as part of their financing strategy. In a sale-leaseback, private equity firms can sell their portfolio company real estate to an investor for cash while the company simultaneously enters into a long-term lease. In doing so, the PE firm extracts 100% of the real estate’s value and converts an otherwise illiquid asset into working capital. This is particularly beneficial now, as cap rates on sale-leasebacks have risen significantly less than other forms of debt, making them an attractive funding alternative on a relative cost of capital basis. For PE firms evaluating a sale-leaseback, there are several factors to consider when choosing a partner to ensure the deal gets done quickly, efficiently and meets the needs of all parties. Here are three that are critical in today’s environment: Experience One of the most important qualities to look for in a sale-leaseback partner is experience. Ensuring the investor has a strong history of successfully closing transactions, including private equity-backed transactions, will ensure the process is smooth and well executed. In addition, if the deal involves multiple properties, countries or lease structures it’s important to look for a global investor with the ability to execute on complex, cross-border and multijurisdictional transactions. There are a number of new entrants in the sale-leaseback space, so working with an investor with several decades of experience may help maximize proceeds and make the process easier, particularly for PE firms exploring sale-leasebacks for the first time. Access to capital Another critical quality in a sale-leaseback partner – made more important in today’s environment – is access to capital. All-equity buyers, which are typically publicly traded REITs that access the public equity and debt markets, are better positioned to close on deals given they aren’t reliant on securing third-party debt financing at the time of close. This means they are less likely to re-trade and can offer better certainty of close when it comes to execution. Ability to meet timing constraints Many private equity firms considering sale-leasebacks are looking to do it in conjunction with a portfolio-company acquisition, leveraging the financing as part of the capital stack. This means that finding a sale-leaseback partner that can meet timing constraints is important, given the capital is needed to complete the corporate acquisition. Experienced and well-capitalized investors can typically provide a quicker and more efficient close, and some even have the ability to close in less than 30 days if required. For an example of how PE firms can use sale-leasebacks to help fund an acquisition, read about W. P. Carey’s recent deal with SK Capital and Apotex. Closing thoughts By finding a partner with these characteristics, private equity firms can successfully leverage a sale-leaseback to help capitalize on M&A opportunities and unlock value in portfolio-company real estate assets. W. P. Carey has 50 years of experience and has successfully closed nearly $6 billion in PE-backed deal volume. Contact us today if you’d like to evaluate a sale-leaseback as part of your financing strategy!
How Private Equity Can Leverage Sale-leasebacks
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.
What’s Next for Net Lease?
The effect of rising interest rates registers in many ways around the real estate world, but perhaps the starkest impact can be seen in the investment volume differential in one of CRE’s most popular sectors. Net lease investment volume decreased roughly 35% year over year in the third quarter, according to Jason Patterson of W. P. Carey. The VP of investments at one of the largest diversified net lease REITs notes the Fed’s impact on market players has been far-reaching. “Net lease volume prior to the Fed moves had been near or at record levels so the run-up in rates certainly impacted people getting on the same page with the value of real estate or what they were willing to commit to on a cap rate basis,” Patterson said. “A high level of volatility in a space where people are making long-term investments is not the ideal environment.” A Debt Market in Disarray Call it a pause, a disconnect, or total debt market disarray, 2022 has brought major headwinds to a CRE industry and net lease sector that have gotten accustomed to cheap capital. Yet, Patterson reports still seeing a lot of attractive opportunities in the market. “Private equity-backed sellers or tenants continue to use sale-leasebacks as an attractive form of unlocking tied-up capital in their acquisitions, a counter-inflationary move that in some cases has been beneficial to us,” he said. “They’re viewing it more and more as a regular, very attractive component of the capital stack, which I think is good from a broad industry perspective.” Unencumbered by rising capital costs, equity investors have certainly found more room to work within the net lease market “The current environment favors people in a high certainty or all-cash type of capital structure like W. P. Carey,” Patterson said. “We’ve seen increased focus on certainty of close as levered buyers signed up for deals maybe in the early part of the summer and then with rising debt costs their assumptions didn’t pan out. You see deals come back to market as more investors have to reevaluate pricing in this period of volatility.” 2023 Outlook Citing the first half 2022 industrial deal volume exceeding more than 50% of the STNL market, Patterson forecasts that industrial product will continue to be a very attractive investment target. He added though that not all industrial product types are created or viewed equally. “Rather than just lump everything into broad industrial, we’re looking for real estate that is extremely critical to operations for our tenants,” he said. “Maybe we’re willing to give up a little bit in terms of fungibility for increased certainty that tenants are going to renew and keep paying rent for the long term. Asset classes such as cold storage and food production are extremely important to users and they don’t have a ton of alternative options available.” A $75 million sale-leaseback W. P. Carey completed in the second quarter embodies the above trends. The 25-year net lease for six mission-critical specialty manufacturing facilities totaling approximately 1.1 million square feet in three countries is backed by private equity. “There continue to be more and more deals getting done with private equity sponsorship, and we’d expect that to largely continue in 2023,” Patterson said. “The trend, a positive one for the industry, really is private equity ownership looking toward sale-leasebacks.”