A real estate sale-leaseback is a transaction in which the owner-occupant Grower sells the land and building used in its business operations to a special purpose investor and then simultaneously leases the property back from the investor on lease terms agreed to concurrent with the real estate sale transaction. Typically, this will be a long-term investment for the special purpose investor so the seller is able to negotiate directly with the investor a mutually agreeable and clear set of lease terms.

What is a Sale-Leaseback?

Most companies are not in the business of owning real estate but need the utility of land and buildings to produce their grow. A sale-leaseback enables a Grower to reduce its investment in these non-core business assets (the land, building & tenant improvements) and liberate the cash in exchange for executing a lease and paying rent. In a sense, a sale-leaseback separates the “asset value” from the “asset’s utility value” in a company’s real estate investment.

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In the right set of circumstances, a sale-leaseback transaction can have a number of benefits to the Grower that is the real estate seller.

Set Your Own Lease Terms

Because the Seller/Grower is also the lessee, the Grower has significant bargaining power in structuring the property lease. In addition to realizing their investment in the real estate, the lessee has the opportunity to negotiate an acceptable lease agreement with the investor acquiring the property. Typical leases run 15 to 25 years. The Seller/Grower, now the tenant, can also negotiate extension options after the lease expiration, and can also include terms for early lease termination if the tenant sees a need for more flexibility.

Retain Control of Real Estate

Most sale-leasebacks are structured as triple-net leases, so the tenant will be responsible for the taxes, insurance, and common area maintenance. A long-term, ‘hands-off’ lease from the investor provides the tenant similar control over the property as was the case when the tenant owned the property. The tenant can work with the special purpose investor and include options that will provide for future expansion and sublease of the property.

Tax Savings

Generally, lessees that are engaged in a lease are able to write off their total lease payment as an expense for tax purposes. As property owners, the interest expense and depreciation were the only tax deductions available. As a result, a sale-leaseback may have a greater tax advantage, but you must check with your own tax advisor to fully understand what the total tax implications may be.

Greater Value to the Real Estate

Unlike a mortgage, a sale-leaseback can often be structured to finance up to 100% of the appraised value of the Grower’s land, building and tenant improvements. As a result, a sale-leaseback more efficiently uses the Grower’s investment in the real estate asset as a financing tool.

No Financial Covenants

Because a sale-leaseback is not technically a financing instrument it does not typically have any covenants on the company.

Fewer covenants provide a company with greater control over its own business and operations.

Attractive Implied Financing Rates

A sale-leaseback has an implicit financing rate, (“cap rate”) embedded in the future rent payments. Although the sale-leaseback cap rates are frequently slightly more than similar mortgage rates, a sale-leaseback provides cash proceeds for up to 100% of the appraised value of the property versus the 70% to 80% of appraised value under a typical mortgage. A sale-leaseback investor has only the real estate as collateral and a relationship with the Grower through the lease agreement. As a result, the sale-leaseback is slightly more expensive than senior financing and less expensive than mezzanine financing.

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Real Estate

We acquire, develop, lease and manage properties that have been approved by state and local authorities for the specific use of growing medical cannabis.

From site selection to financing, to delivery of the finished project, Fusion’s sale/leaseback or build-to-suit approach results in a facility that meets the long-term needs of our tenants. Our team works together to translate your business needs into facility needs. To speak with FUSION PROPERTIES about your specific situation, please contact:

Kendell Lang
CEO & Principal Investor
1155 Camino del Mar, Suite 521
Del Mar, CA 92014
(m) 760.445.3315


Go To https://calendly.com/kendell-lang in order to schedule a discovery call.