A leaseback is a reverse lease transaction; that is, it is a transaction in which the owner of a property sells it to a financial institution and, at the same time, enters into a lease agreement for that same property. In this way, the property owner receives the proceeds (cash) from the sale but does not lose the use of the property. Upon the contract’s expiration, the owner has the option to repurchase the asset at a predetermined price.

In times like these, when liquidity has dried up for many companies, this type of transaction is extremely attractive, as it provides the “seller” with the necessary liquidity without losing the ability to use the asset that enables them to conduct their business. For example, a business owner with commercial property who lacks the liquidity to continue purchasing supplies enters into a two-year leaseback agreement with a financial institution, selling the property to it. This provides the funds needed to keep the business running in the short term. After two years, when the economic situation is more favorable and the business is operating more normally, the entrepreneur repurchases the premises at the agreed-upon value. For financial institutions, a leaseback represents an asset with a fixed return derived from lease payments over the term and protection against default or non-payment, provided by the collateral—the premises purchased at the outset.