Retail Sale-Leaseback Deals Are on the Rise

David Swartz

Retail sale-leaseback deals are on the rise. Retailers are using the transaction structure to unlock capital tied up in real estate and as an alternative to financing. On the capital side, retail investors are chasing these deals, particularly for triple-net lease structures.

“There can be several drivers, but they all relate to unlocking capital from real estate for other uses. One driver is the use of this structure as an alternative to financing,” David Swartz, a partner at Crosbie Gliner Schiffman Southard & Swanson LLP, tells GlobeSt.com. “With interest rates still low by historical standards, use of a sale-leaseback structure as a financing mechanism is not as prevalent as it was in the past. Another driver of this activity in the retail arena relates to when a retail operator owns several sites but, because of financing or other concerns, finds it advantageous to monetize its real estate by creating a separate property ownership entity and separate operating entity whereby the land is transferred to the property entity and leased back to the operating entity. As a second step, the land-owning entity is then sold to a third party.”