Sale-and-lease-back as a balance sheet tool

What sets the price

Three factors, in this order: the term of the leaseback, your covenant strength as tenant, and third-party usability of the building. A twenty-year indexed lease with a solid mid-sized company produces a completely different multiple than a ten-year lease with a break option.

Buy-back options cut both ways. Buyers price them, sometimes heavily, because they disrupt exit planning. If you want one, structure it as a right of first refusal at market terms rather than a fixed price option.

Assess the accounting effect realistically

Under IFRS 16 the right-of-use asset returns to the balance sheet, so the relief is much smaller than under local GAAP. If the transaction is justified primarily by ratios, walk through it with your auditor first.

When we advise against it

When the site will be too small in five years — you then sell yourself into a long lease that is expensive to unwind. And during restructuring: buyers price tenant covenant very precisely.