Why Consider a Sale-leaseback?
Top motivations behind this financing method in today's environment
In today’s economic environment cash is king, and businesses both large and small are looking for ways to boost their cash flows. That’s why an increasing number of companies are monetizing their real estate to unlock otherwise illiquid capital through sale-leasebacks. Sale-leasebacks give companies the liquidity needed to address a number of strategic and financial initiatives and are growing in popularity. Here are three of the biggest factors motivating companies to pursue a sale-leaseback now.
Cheaper alternative to debt
When it comes to raising capital, companies typically have a menu of options to choose from including high-yield bonds, bank debt, equity raising or sale-leasebacks. However, some of these methods have been more negatively affected by higher interest rates than others.For instance, bonds and bank debt have both increased by more than 400 basis points since early 2022. On the other hand, cap rates on sale-leasebacks have risen significantly less – about half as much – making sale-leasebacks a more attractive alternative on a relative cost of capital basis. From a purely financial standpoint, this is driving more companies, particularly those with high-quality, mission-critical real estate assets, to leverage sale-leasebacks as one of their primary forms of capital raising.
Capital to reduce leverage
Given recent economic volatility, more companies are seeking to strengthen their overall credit metrics and capitalization to best position themselves for the future. Sale-leasebacks are a great solution for companies looking to reduce leverage, as the proceeds can be used to pay down shorter-term debt or maturing debt that has become significantly more expensive to refinance. The reduction in leverage helps improve both a business’ debt / EBITDA ratio in addition to debt / capitalization, which can improve a company’s overall credit and better position them for the long term.
M&A financing
Company valuations remain significantly lower than early 2022. While this has caused an overall reduction in volume in the M&A market, some businesses are taking advantage of the fact that their acquisition targets may have become cheaper. For companies looking to opportunistically expand through M&A, sale-leasebacks are an excellent tool to add to the capital stack. By pursuing a sale-leaseback concurrently with a new acquisition, the acquirer can reduce their equity check and boosts returns – effectively ‘buying down’ the acquisition multiple. Private equity firms, in particular, are increasingly using this technique for buyouts. Read about W. P. Carey’s recent transaction with SK Capital and Apotex to learn more.
Closing thoughts
While sale-leasebacks are a great capital tool in high-interest-rate environments, they can be just as useful in less turbulent climates. Freeing up capital from owned real estate – in any stage of the market – is an excellent way to invest in the core competencies of a business and fund internal and external growth objectives. Interested in exploring a sale-leaseback? Contact W. P. Carey today!
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The Net Lease Market Finds Its Footing
Net lease investors have been on a wild ride over the last few years. The large run-up in benchmark rates beginning in 2022 created challenges around pricing expectations. However, Jason Patterson, executive director, investments at W. P. Carey, notes that despite some trade volatility and other factors, more stability in long-term rates over the past two years has helped those on both sides of a transaction find more common ground on where pricing should land. Bid-Ask Spreads Narrow as Pricing Stabilizes For much of the reset period, sellers were anchored in 2022-era valuations, while buyers priced deals on materially wider rates, and that gap has begun to narrow. “A slightly more range-bound 10-year Treasury provides some confidence on where pricing should shake out,” says Patterson. He adds that increased capital inflows to the net lease space have also further compressed bids, driving more transactions to pencil out on both sides. Where sellers once struggled to meet the market, a more stable pricing environment has made that alignment more achievable. Tighter Credit Spreads and Sale-Leasebacks Support Deal Flow Patterson explains that credit spreads broadly had been near record lows until recently, a condition that he describes as helping keep cap rates from widening significantly. Tighter spreads benefit net lease investors both in how deals are capitalized and in the cap rates at which tenants and developers expect to transact. Patterson notes that he expects to see an increase in sale-leaseback interest driven by a pickup in private equity and M&A activity. He also adds that lower short-term rates may stimulate deal flow in private equity, and a change in ownership often serves as the catalyst for a sale-leaseback arrangement. Moving forward, Patterson points to interest rate volatility and credit as two of the most important factors for net lease investors. Rate volatility, he notes, can quickly undermine returns. He also flags credit as a persistent area of focus, noting that while recent headlines have raised broader concerns, the long-term nature of net lease real estate may make those risks more muted than in other sectors. And as the market moves into a more active phase, those who keep a close eye on both will be best positioned to capitalize on what Patterson sees as a period of growing opportunity ahead.
MIPIM 2026: Where Capital, Conviction and Opportunity Converge
As the industry gathers once again in Cannes for MIPIM 2026, the European real estate investment landscape appears to be at an important inflection point. After several years defined by volatility, repricing and constrained liquidity, there are growing signs of stabilisation — though the recovery remains uneven and market-specific. Against that backdrop, three questions are likely to dominate conversations at MIPIM this year: Are European transaction volumes expected to improve? How will the sale‑leaseback market evolve amid a significant wall of maturing debt? Which sectors appear best positioned as investors recalibrate their strategies? The Outlook for European Transaction Volumes Pricing expectations between buyers and sellers have adjusted meaningfully over the past 18–24 months, following one of the sharpest repricing cycles the European real estate market has experienced in decades. After a prolonged period of stalled activity, valuations across many markets now show clear signs of stabilisation, supported by greater transparency around interest‑rate policy and financing costs. While long‑term rates remain elevated relative to the pre‑2022 environment, the pace of change has slowed, allowing investors to underwrite returns with greater confidence and begin re‑engaging selectively with the market. This improved clarity around cost of capital is starting to translate into renewed deal momentum in several core European markets. Savills reports that European investment volumes are expected to rise by around 18% in 2026 as pricing firms up, macroeconomic conditions stabilise and institutional capital returns more consistently across the main sectors. That said, recovery is unlikely to be uniform. We continue to see divergence between markets and sectors, with liquidity gravitating toward assets where fundamentals are strongest and underwriting assumptions can be supported over the long term. Sale‑leasebacks and the Growing Need for Capital One of the most prominent themes we expect to discuss at MIPIM 2026 is the growing demand for alternative sources of capital — particularly as a significant amount of corporate and real estate debt comes due this year and next. Across Europe, many owner-occupiers are facing refinancing challenges in an environment where traditional bank lending remains selective and difficult to access. At the same time, businesses are contending with higher operating costs, investment requirements linked to competitiveness, and the need to preserve balance‑sheet flexibility. In this context, sale‑leasebacks are increasingly being viewed as a strategic financing tool. By unlocking capital tied up in real estate, owner-occupiers can redeploy funds toward growth initiatives, operational requirements and debt paydown, while retaining long‑term operational control of their assets. Sectors to Watch: Industrial and Retail When it comes to sector preferences, industrial and retail assets continue to stand out, provided they are underpinned by strong occupier fundamentals. In the industrial space, manufacturing and logistics assets that play a critical role in supply chains remain attractive. Structural trends such as nearshoring, supply‑chain resilience and e‑commerce continue to support demand in many European markets. Assets that are modern, well‑located and tailored to tenant needs are increasingly difficult to replace, reinforcing their long‑term importance. Retail also remains an area of opportunity — particularly for formats that serve non‑discretionary or value‑oriented consumer demand. Grocery‑anchored retail, DIY, and other essential retail categories have demonstrated resilience through economic cycles, supported by consistent foot traffic and defensive spending patterns. A Measured but Constructive Outlook MIPIM 2026 comes at a time when optimism is returning to European real estate markets. While challenges remain, there is growing evidence that capital is being deployed at more significant levels — particularly where opportunities are grounded in fundamentals rather than short-term trends. The conversations in Cannes this year are likely to reflect that balance: pragmatic, selective, but increasingly forward‑looking. For long‑term investors focused on durable cash flows and partnership‑driven transactions, the environment continues to present compelling opportunities.