Unlock Liquidity from Your Own Property
Many companies in Austria own real estate that is essential to their operations—production facilities, office buildings, or logistics centers. What is often underestimated is that these properties represent tied-up capital.
Sale and Leaseback offers a strategic solution here. The company sells its property to an investor and immediately leases it back. Use and operation continue as usual—and liquidity flows in immediately.
Especially in economically challenging times, it is possible to Sale and Leaseback be a flexible alternative to traditional bank financing.
Cf: wko.at
What exactly does “sale and leaseback” mean?
At the Sale and Leaseback A company sells a property (e.g., a business building) and, at the same time, enters into a long-term rental or lease agreement.
The company remains the user—but loses ownership.
Typical Procedure
- Property Valuation (Market Value/Fair Value)
- Sale to an Investor
- Signing a Long-Term Lease Agreement
- Use as before
Important: From a tax and accounting perspective, the key factor is whether the transaction is actually recognized as a sale or is considered financing from an economic standpoint.
7 Benefits of Sale-and-Leaseback for Businesses
1. Immediate Liquidity
The biggest advantage of Sale and Leaseback is the release of tied-up capital. Instead of taking on debt, equity capital is raised.
2. Improving the equity ratio
Depending on the structure, the balance sheet ratio may improve. But be aware: Under IFRS, sale-and-leaseback transactions can generally no longer be treated as off-balance-sheet items. (
Cf: ifrs.org
3. Realization of Hidden Reserves
Real estate that has been part of a business’s assets for years often has hidden reserves. These are realized upon sale.
4. Alternatives to Bank Financing
Especially when lending is restrictive, Sale and Leaseback constitute financing independent of banks.
5. Planning certainty through long-term lease agreements
Long-term lease agreements ensure the use of the property for many years. Legally, this constitutes a lease agreement for consideration pursuant to § 1090 of the ABGB.
6. Tax Planning Options
The following should be noted in particular: real estate transfer tax (GrESt), value-added tax option, real estate income tax, and the fee for a lease agreement.
7. Strategic Focus
Companies focus on their core business—not on real estate management.
Risks and Legal Pitfalls in Sale-and-Leaseback Transactions
So attractive Sale and Leaseback is—risks must not be ignored.
Long-term fixed costs
Rent payments continue for years. Terminating the lease is often only possible under certain conditions.
Loss of Appreciation
Rising real estate prices will benefit investors in the future.
Review Contract Clauses
- Indexing
- Rights to Terminate
- Covenants
- Collateral
Checklist: Is Sale & Leaseback Right for Your Company?
| Exam Question | Yes | No |
|---|---|---|
| The property is necessary for business operations | ☐ | ☐ |
| High proportion of tied-up capital | ☐ | ☐ |
| Good credit rating | ☐ | ☐ |
| Long-Term Site Planning | ☐ | ☐ |
| A tax audit is conducted | ☐ | ☐ |
| Market Value Determined by Professionals | ☐ | ☐ |
Decision-Making Framework: Economic Evaluation
| Criterion | Rating (1-5) | Comment |
|---|---|---|
| Liquidity Needs | ||
| Is bank financing possible? | ||
| Market Value of Real Estate | ||
| Tax Implications | ||
| Long-Term Strategy |
Key Takeaways
- Sale and Leaseback Provides Immediate Liquidity
- Realization of Hidden Reserves Is Possible
- Alternative to Bank Financing
- Tax and Financial Statement Audit Required
- Be aware of long-term lease commitments
- Contract drafting is crucial
Conclusion: A strategic tool with potential
Sale and Leaseback It is not a stopgap measure—but rather a strategic financing tool. When structured properly, it can generate liquidity, optimize balance sheet ratios, and increase business flexibility. However, a thorough legal and tax review is crucial—particularly with regard to real estate transfer tax, value-added tax, and economic attribution. (Source: internal PDF)
You want to check whether Sale and Leaseback Is this a good fit for your business? Contact us for a no-obligation initial consultation – KROY REAL ESTATE
What is a sale-and-leaseback, explained simply?
A sale-and-leaseback arrangement involves a company selling its property and then leasing it back on a long-term basis. This ensures continued use of the property while immediately freeing up liquidity. Sale-and-leaseback is often used as an alternative to traditional bank financing.
For which companies is sale-and-leaseback suitable?
Sale-and-leaseback is particularly well-suited for companies with real estate essential to their operations and a high amount of tied-up capital. A prerequisite is a stable credit rating and long-term location planning. Manufacturing facilities, logistics companies, and retail businesses in particular benefit from this model.
What are the benefits of a sale-and-leaseback arrangement?
The main advantages of sale-and-leaseback are:
Immediate Liquidity
Realization of Hidden Reserves
Improvement in Financial Ratios
Independence from Bank Loans
Strategic Focus on the Core Business
What are the risks associated with sale-and-leaseback?
The risks associated with sale-and-leaseback transactions include long-term lease obligations, the loss of future appreciation, and potential tax and accounting implications. Careful contract drafting and tax review are therefore crucial.
Is real estate transfer tax due in a sale-and-leaseback transaction?
Yes, when selling a property as part of a sale-and-leaseback transaction, real estate transfer tax generally applies. VAT considerations and potential real estate income tax must also be reviewed. Tax advice is therefore recommended.
Is it possible to account for a sale-and-leaseback transaction off-balance-sheet?
Under current accounting standards (e.g., IFRS), sale-and-leaseback transactions can no longer be treated as off-balance-sheet items in many cases, as a right-of-use asset and a lease liability must be recognized. The specific impact depends on the applicable accounting standard.
How long do typical sale-and-leaseback agreements last?
Contract terms for sale-and-leaseback arrangements are often between 10 and 25 years. The long term provides planning certainty, but also means a long-term commitment to paying rent.
Is a sale-and-leaseback better than a bank loan?
Whether a sale-and-leaseback arrangement is more cost-effective or strategically sound than a bank loan depends on the individual situation. Factors such as interest rates, creditworthiness, property value, and corporate strategy play a key role.
