LeadCrest Capital Partners is a dedicated European sale-leaseback and build-to-suit investment specialist. The company provides investors with a stable, predictable, inflation-protected return built through quarterly-distributions.

LeadCrest provides European firms regardless of:


with an attractive alternative source of financing through the monetization of corporate-owned real assets.

Sector Definition

A sale-leaseback transaction is the simultaneous occurrence of two transactions: 1. The sale of a real estate asset, and concurrently 2. The lease of such asset back to the seller which then becomes the tenant or lessee.


Sells Property

Pays Rent


Pays 100% Market
Value for Asset

Leases Back


Transaction Types

Net lease is the broader name given to the sector which typically includes the following three types of transactions:

In a sale-leaseback, a company/corporate-user sells a balance sheet property (“sale”) and commits to rent it back under a simultaneous lease agreement (“leaseback”).
In a build-to-suit, a company/corporate-user finances the construction of a new asset (corporate headquarters, store, warehouse, etc.) through a forward purchase agreement. The buyer agrees to a pre-approved purchase price upon completion of works in exchange for a lease agreement which will start upon the tenant moving into the newly-built premises. It is therefore similar to a sale-leaseback transaction, but on a “to be built” asset.
Net Lease
A net lease transaction is simply the sale of a single tenant net leased property from one investor to another. The original investor who acquired the asset sells the real estate to a new investor who then assumes the existing lease contract. It is important to note that the new investor does not have the opportunity to negotiate or structure the lease. As the largest volume of transactions reside in this third category of transactions called net lease, the overall sector is generally referred to as the “net lease” sector.

Sale-leaseback and build-to-suit transactions are generally regarded as “primary” transactions whereas net lease transactions are qualified as “secondary” transactions.

Net-Lease definition

In a primary transaction, the seller enters into a lease agreement where all operational and financial responsibility of the property remains with the seller. The most common lease terminology to qualify such type of lease is “triple net lease”. Under a triple net lease, the tenant is responsible for:


  • Maintenance costs (both operational and capital expenditures)
  • Real estate taxes
  • Property related insurance costs

Sale - Leaseback Rationale

Investor/Buyer Viewpoint

For an investor, a sale-leaseback transaction is equivalent to a long-term non-terminable bond with real estate as a collateral. To illustrate the advantages for an investor: assume that a company borrows €10 million over 10 years through a traditional bullet bond with no option to prepay before maturity. In such an example the company would pay interest every year, and at the end of the 10-year maturity, the €10 million principal would be paid back. As an alternative to such bond financing, the company could sell €10 million worth of real estate assets through a sale-leaseback transaction. Every year, the company would pay rent instead of interest, and at the end of the lease term it would simply decide whether to remain in the property and extend or renew the lease, or alternatively vacate the premises.


From the investor standpoint, a sale-leaseback is similar to a bond. The investor has visibility on their 10 years of cash flow. A 10-year loan without any prepayment offers the same duration as a 10-year lease with no early break option.


Assuming the lease is structured as triple net lease, then the rent is similar to the property’s Net Operating Income, with limited to no cash flow leakage. This is like a bond investor subscribing to a bond at issuance and clipping the coupon.


Beyond just being comparable to a bond, a sale-leaseback transaction presents several features which positively compares against simple bond returns. For instance, over the term of the lease, rent rises (e.g. via CPI, fixed bumps, or contractually agreed upon escalations) increasing the yield. Bond coupons are typically flat during the duration of the bond.


A sale-leaseback transaction also compares favorably relative to a bond when it comes to residual value. At maturity, the borrower pays back the principal whereas in a sale-leaseback transaction, the investor has potential upside by selling the property at a higher value than the initial purchase price.


Lastly, a sale-leaseback transaction is the ownership of an asset and as such provides strong downside risk protection similar to senior secured bond investors. In a bankruptcy process, the tenant has the option to either assume the lease as documented or reject it as is. If assumed, the sale-leaseback investment’s cash flow stream is often unaffected, and its value may actually increase as the company exiting bankruptcy posts a stronger balance sheet and therefore a better credit. If the lease is rejected, the investor may sue to recover damages alongside other creditors while retaining title to the property. The property may be either held and re-leased or sold. The ownership of strategic or mission critical operating facilities offers a high recovery rate in bankruptcy processes.


The table below summarizes certain aspects of a sale-leaseback transaction relevant to a traditional bond or loan.


“Bond-type” lease agreement
“Triple-net” lease agreement
Annual rent escalations
Upside through residual real estate value
Seniority in tenant’s capital stack
Long-term fixed lease term with no break or exit options
All capital, operational expenditures, real estate taxes and insurance costs are the responsibility of the tenant
Directly linked to CPI or even better annual fixed escalations
Excluding any cap rate compression, upside through higher rent at exit Potential for further upside through cap rate compression
Most senior and secured creditor
Impact on Cash-flows
Visibility and predictability of CF
Low/no leakage in CF High conversion from rent to NOI
Inflation-protected CF
Additional profit at the back end on and above the secured annuity
High safety and low volatility of CF

Corporate/Seller Viewpoint

A sale-leaseback transaction is an appealing source of alternative capital for corporate users (tenants). It enables a company to monetize 100% of its real estate value (increased liquidity) and maintain operational control of the assets (increased control). Rather than holding a non-revenue producing asset on the balance sheet, a sale-leaseback allows companies to unlock and redeploy that capital. The result is an asset light company with increased liquidity. In the scenario that the tenant is a publicly listed company, this signals to the market that they are focusing on deploying capital to core businesses. The table below summarizes aspects of a sale-leaseback transaction that will assist the tenant in maximizing shareholder value, improving cash flow, and reducing risk.

Proceeds: realization of 100% of asset value
  • Corporate-owners can capture 100% of the fair market value of a real estate property through a sale-leaseback transaction
Long-term, non-bank financing
  • Long-term debt financing is not currently available in the bank debt markets
  • Long-term leases take away refinancing risk
  • Matches a long-term asset (property) with a long-term liability (lease)
  • No amortization or principal repayment
Limited financial covenants
  • Sale-leaseback financing rarely has financial covenants
Flexibility in use of proceeds
  • Sale-leaseback proceeds can be used for corporate growth (M&A, acquisition or construction of new facilities, expansion into new territories, capex/reinvestment, R&D funding) or balance sheet management (debt reduction, corporate restructuring,/LBO)
Accounting: operating lease treatment
  • Can be structured as an operating lease which will benefit off-balance sheet treatments
  • Leaves borrowing capacity unaffected
Tax credit
  • Rent as an expense will reduce corporate income tax
Improved financial ratios
  • Monetization of illiquid non-operating cash flow producing assets allows for an automatic improvement in critical financial ratios such as ROA (Returns on Assets) or ROCE (Returns on Capital Employed)
Operational control
  • Tenant remains in operational control of the assets
  • Lease agreements structured to meet tenants needs