In Simple Terms
Own a warehouse → Sell the warehouse → Receive capital → Lease the warehouse back → Continue operating from the same facility.This structure can allow businesses to access capital tied up in property without necessarily having to relocate their operations.
What Is a Sale-Leaseback?
A sale-leaseback is a transaction in which a company sells an asset, such as a warehouse or other property, and then leases that same asset back from the new owner for an agreed period. Under the arrangement, the original owner becomes the seller-lessee, while the buyer becomes the buyer-lessor. The company no longer owns the property, but it can continue using the facility under the terms of the new lease. The IFRS Foundation describes a sale and leaseback as a transaction where a company sells an asset and leases that same asset back for a period of time from the new owner. For businesses with substantial capital invested in warehouse properties, this structure can turn an otherwise illiquid real estate asset into available capital while allowing the business to continue using the facility.How Does a Warehouse Sale-Leaseback Work?
A typical warehouse sale-leaseback can be understood through a simple sequence. The exact transaction structure, valuation, lease terms, and accounting treatment will depend on the specific agreement.1. The Business Owns the Warehouse
The company owns a warehouse or other operational property that it currently uses for storage, distribution, manufacturing, logistics, or related activities.2. The Property Is Sold
The company sells the property to a buyer under an agreed transaction structure and receives the proceeds of the sale.3. The Facility Is Leased Back
The company enters into a lease agreement with the new owner and continues using the same warehouse as a tenant.4. The Business Uses the Released Capital
The capital received from the sale can potentially be redirected toward business priorities such as expansion, equipment, working capital, or other investments.A Simple Example of Sale-Leaseback
Consider a business that owns a warehouse used for its distribution operations. The company wants to expand but has a significant amount of capital tied up in the property.| Before Sale-Leaseback | After Sale-Leaseback |
|---|---|
| Property ownership Business owns the warehouse. | Property ownership Buyer owns the warehouse. |
| Capital Capital remains tied up in the property. | Capital Business receives proceeds from the sale. |
| Facility use Business operates from its own warehouse. | Facility use Business continues operating from the warehouse under a lease. |
| Real estate responsibility Business retains ownership responsibilities. | Real estate responsibility Ownership responsibilities shift according to the transaction and lease agreement. |
Why Do Businesses Consider Sale-Leaseback?
Businesses may consider sale-leaseback when they want to unlock capital from property they already own while maintaining access to the facility that supports their operations.Unlock Capital
Selling an owned warehouse can release capital that was previously tied up in the property.Continue Operations
The business can continue using the same facility through a leaseback arrangement, helping maintain operational continuity.Support Business Growth
Released capital may potentially be directed toward expansion, equipment, inventory, working capital, or other strategic priorities.Reduce Capital Tied Up in Property
Businesses can reconsider how much capital they want to keep invested in operational real estate while retaining access to the facility.What Can Businesses Do With the Released Capital?
The appropriate use of sale proceeds depends on the company’s financial position, strategy, and business priorities. Potential uses may include:- Business expansion
- New equipment or operational investments
- Additional inventory or working capital
- Expansion into new markets
- Development of additional logistics capacity
- Debt management or other financial priorities
Sale-Leaseback vs. Traditional Warehouse Financing
Businesses looking to unlock capital from an owned warehouse may consider different financing or property strategies. A sale-leaseback differs from a traditional mortgage or property-backed loan because the company sells the property rather than retaining ownership and borrowing against it.| Consideration | Sale-Leaseback | Traditional Property Financing |
|---|---|---|
| Property ownership | Property is sold to the buyer. | Business generally retains ownership. |
| Capital access | Capital comes from the property sale. | Capital comes from borrowing. |
| Use of facility | Business can continue using the property through a leaseback. | Business continues using its owned property. |
| Long-term obligation | Lease obligations under the sale-leaseback agreement. | Loan repayment and related financing obligations. |
What Should Businesses Consider Before a Sale-Leaseback?
1. Property Value
The value of the warehouse is a fundamental consideration. Businesses should understand the property’s market value and evaluate whether the proposed transaction reflects appropriate commercial terms.2. Lease Terms
The company should carefully evaluate the lease period, rental payments, renewal provisions, maintenance responsibilities, permitted use, and other contractual conditions before completing the transaction.3. Long-Term Operational Requirements
A business should consider how long it expects to need the facility and whether the warehouse will remain suitable for its operations throughout the lease term.4. Capital Allocation
The business should have a clear plan for the capital released through the transaction. Unlocking capital is only useful if the proceeds can support meaningful financial or operational objectives.5. Accounting and Tax Considerations
Sale-leaseback transactions can have specific accounting implications. Under IFRS 16, for example, accounting treatment depends on whether the transfer qualifies as a sale under the applicable requirements. The IFRS Foundation’s guidance on sale-and-leaseback transactions illustrates how the seller-lessee accounts for the retained right of use and lease liability when the transfer qualifies as a sale. Businesses should obtain appropriate accounting, tax, legal, and financial advice before entering into a sale-leaseback transaction.Who Can Benefit From a Warehouse Sale-Leaseback?
Sale-leaseback may be considered by businesses that own operational warehouse facilities and want to explore ways of unlocking capital while maintaining access to their existing location.- Logistics and third-party logistics providers
- Manufacturers with owned warehouse facilities
- Retail and distribution businesses
- FMCG companies with established distribution facilities
- Import and export companies
- Businesses with significant capital invested in operational real estate
- Companies seeking additional capital for expansion or strategic investment
Sale-Leaseback Solutions in the Philippines
ISLA Logistics Corporation provides Sale-Leaseback Solutions for businesses seeking to unlock capital while continuing to operate within their existing warehouse facilities. The solution is designed for businesses that already own suitable warehouse properties and want to explore a structure that combines property monetization with continued operational access. ISLA Logistics currently highlights sale-leaseback opportunities in Manila, Clark, and Cebu, subject to the suitability of the property and transaction requirements.Manila
Sale-leaseback solutions for businesses operating from strategically located facilities in Metro Manila.Clark
Sale-leaseback opportunities for businesses operating within Central Luzon’s major logistics and transportation corridors.Cebu
Sale-leaseback solutions for businesses supporting logistics and distribution operations across the Visayas.Why Consider ISLA Logistics?
ISLA Logistics Corporation supports businesses seeking warehouse and logistics infrastructure solutions across the Philippines. Its warehouse solutions include sale-leaseback, warehouse leasing, build-to-suit, and flexible storage options. This broader range of solutions allows businesses to evaluate different approaches depending on whether they need new warehouse space, customized facilities, flexible storage, or capital from an existing property. Explore ISLA Logistics’ warehouse solutions to learn more about the available options.Own a Warehouse and Looking to Unlock Its Value?
If your business owns an operational warehouse and is exploring ways to unlock capital while continuing to use the facility, ISLA Logistics can discuss the potential requirements for a sale-leaseback arrangement.
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