What is a sale-leaseback?
In a sale-leaseback, a property owner/occupant sells one or more assets to a third party and simultaneously leases them back, becoming the tenant. This arrangement enables the owner/occupant to unlock the value embedded in its real estate while maintaining full operational control of the facilities.
Below we illustrate how Credit Tenant Lease Financing (“CTL”) can serve as the financing mechanism behind a sale-leaseback.
Transaction Overview
Looking to convert a static real estate asset into strategic capital, a US-based distributor of industrial and utility materials sought to monetize an owned facility and redeploy the proceeds to pay down its revolver, creating additional capacity for acquisitions. PGIM partnered directly with the company's management team to structure a CTL financing solution capable of funding up to 100% LTV while lowering ongoing occupancy costs. Ultimately, the company determined that a captive-owned CTL execution offered a more accretive outcome than traditional sale-leaseback models.
Outcome and Benefits
Through PGIM's customized financing structure, the company achieved all of its stated transaction objectives, including:
• Meaningful debt reduction: Sale/leaseback proceeds were used to pay down the company's revolving credit facility, reducing total outstanding debt by approximately 14% and expanding available capacity for future acquisitions.
• Retained ownership and control: The company maintained both ownership and operational control of its headquarters building as part of the financing.
• Lower occupancy cost: The structure delivered a materially lower occupancy cost relative to what the company would have incurred under a conventional sale/leaseback arrangement.
• Execution confidence and cost efficiency: Direct engagement and structuring between PGIM and the company's management team provided confidence in execution with no origination fees.
Transaction Structure
Following a comprehensive review of its owned real estate portfolio, the company elected to sell and leaseback its headquarters building, located in a tertiary Midwest market. Rather than transacting with an outside investor, the property was transferred to a captive entity controlled by the company, enabling it to retain ultimate ownership of the asset while still generating cash proceeds. Through a reversionary interest provision, the company preserved the right to reclaim full ownership of the property at the conclusion of the lease term. A balloon payment structure reduced annual occupancy costs by approximately 12% compared to a fully amortizing alternative and funded the transaction at 95.2% loan-to-value based on an in-use valuation.
Learn more about credit tenant lease financing here.
*This case study is for illustrative purposes only and should not be viewed as representative of all transactions or as a guarantee of similar results. Actual terms and execution will vary based on a variety of factors including but not limited to: the facts and circumstances of each transaction, borrower and tenant credit, lease structure, collateral, market conditions, legal and tax considerations, and underwriting approval.
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Publish Date: July 7, 2026
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