What is a sale-leaseback transaction?

A sale-leaseback transaction is characterized by a corporation selling a property it owns and then immediately entering into a lease agreement to rent the same property back. This arrangement allows the corporation to free up capital that was previously tied up in the real estate while still retaining operational control of the property.

In this scenario, the corporation benefits from having cash available for other investments or expenses, while the buyer or investor acquires an asset that generates rental income. This can be particularly advantageous for companies looking to boost liquidity while continuing to use their facilities without interruption.

The other options do not accurately reflect the nature of a sale-leaseback. For instance, if an investor buys a property without leasing it back, that does not constitute a sale-leaseback transaction. Additionally, simply renting property without purchasing does not encompass the sale aspect integral to a sale-leaseback. Finally, the concept of auctioning property after sale does not align with the definition of a sale-leaseback, which inherently involves an immediate post-sale leasing component.