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”) canserve as the financing mechanism behind a sale-leaseback.
Transaction Overview
A large US-based healthcare system occupied a portfolio of medical office buildings and sought to reduce its occupancy costs through a programmatic sale-leaseback. To execute the transactions, the company exercised purchase options embedded in its existing leases and entered into new leases with rental rates anchored to its cost of capital.
Outcome and Benefits
Over a three-year period, PGIM financed the sale and leaseback of multiple properties, delivering the following results:
• Execution confidence and cost efficiency: Our programmatic approach and standardized transaction structure provided confidence in execution, minimized transaction costs, and required minimal out-of-pocket expense, as sale proceeds exceeded the cost of each purchase option exercise.
• No incremental occupancy risk: The transactions introduced no additional risk to the company's existing occupancy, as it never held title to or deployed equity to acquire the assets.
• Significant cost reduction: The company reduced its aggregate occupancy costs across the portfolio by approximately 30% relative to prior lease rates.
• Preservation of tax-exempt status: The company retained its property tax-exempt benefits throughout.
Transaction Structure
The portfolio's purchase options were staggered over a three-year period, with each funding timed to coincide with the exercise of the corresponding option. By establishing a consistent, repeatable framework applicable to each option period, the company avoided the cost and complexity of conducting a separate financing process for each individual asset. Given the intervals between successive transactions, PGIM worked in close coordination with the company's executive management team and its advisors to ensure that each financing tranche closed simultaneously with the exercise of each respective purchase option.
The diagram below highlights the transaction structure of our sale-leaseback transactions.
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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