what is sale and leaseback

Sale and Leaseback in NZ: Turn Property Into Cash in 5 Steps

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easySale

— 6 min read
Sale and Leaseback in NZ: Turn Property Into Cash in 5 Steps

A sale and leaseback means you sell an asset, usually your business premises, to a buyer and lease it straight back, so you receive a lump sum of cash while carrying on exactly as before. You become the tenant, and the buyer becomes your landlord. Accounting and lease terms shape how well the deal works, so we cover those below.

Easysale
TL;DR:Your accountant must confirm the transfer qualifies as a sale under IFRS 16 or AASB 16; otherwise, the proceeds count as financing for accounting purposes.Model variable rent, measurement and settlement dates, and disclosure duties before signing, because each can change lease liabilities or reported gains and losses.Check loan covenants and existing property security early; lender restrictions can block the sale, while losing collateral may affect future borrowing terms.Negotiate lease length, renewal options, tenant protections, and a possible buyback right; a high sale price cannot compensate for insecure occupancy.Set a defined use for proceeds, such as equipment, debt reduction, or seasonal working capital; using the cash to cover ongoing losses often ends badly.

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Table of Contents

What does a sale and leaseback look like in practice?

Say a manufacturer owns its Auckland warehouse and wants cash for new equipment. It sells the building to an investor, signs a lease for an agreed rent and term, and keeps operating from the same site. Investopedia describes the same idea: the seller converts the asset to cash but keeps using it.

Most deals follow the same path:

  1. A valuer assesses the property, and the price is agreed (HAIO explains common valuation methods if you want the background).
  2. Both sides sign the sale agreement.
  3. The lease is negotiated: rent, term, renewal rights and who pays outgoings.
  4. Settlement happens and the cash lands in your account.
  5. You pay rent to the new owner for the life of the lease.

The seller-lessee is you. The buyer-lessor is the investor or fund. Valuers set the price, lenders may need to release existing security, and your lawyer and accountant check the terms. Our guide to legal considerations when selling property in NZ covers the contract side.

Why do owners choose a sale and leaseback?

The main draw is liquidity. You release the money tied up in bricks and mortar and put it where it earns more, or relieves pressure.

  • Reinvestment: proceeds can fund equipment, stock, new sites or acquisitions.
  • Debt reduction: paying down borrowings can strengthen your position with the bank.
  • Working capital: a cash injection smooths seasonal swings.
  • Less landlord work: the new owner takes on property management, so you can focus on your core business. Local reporting in the NZ Herald quotes practitioners making this point.

Some owners also see better return-on-assets and debt ratios once the property leaves the balance sheet, though the tax shape of the deal depends on your circumstances. Our overview of the tax implications of selling property in New Zealand is a sensible companion read.

Pro Tip: Decide what the cash is for before you approach buyers. A clear use of proceeds makes it much easier to judge whether the rent is worth paying.

What should your finance team check under IFRS 16 and AASB 16?

Lease accounting has changed how these deals are reported. Under AASB guidance on sale and leaseback transactions, you first assess whether the transfer qualifies as a sale. If it does, the leaseback is then accounted for under the leasing standard. If it doesn’t, the cash received is treated as a financing arrangement instead.

That first test matters. BDO explains that IFRS 16 changes how gains or losses and right-of-use assets are measured compared with the older rules, so profit or loss recognition can look quite different from what you expect.

A few practical traps are worth checking early:

  • Variable rent payments can complicate how the lease liability is measured.
  • Timing matters: the measurement date and the settlement date can differ.
  • Disclosure requirements are heavier than many owners assume.
  • Your accounting policy may need updating before the deal closes.

Brief your accountant before you sign anything, not after. They can model the effect on your financial statements and flag whether the sale test is likely to be met.

What are the risks and common failure points?

A sale and leaseback is a form of financing, and it has real costs.

  • Rent replaces ownership costs: you may pay more over the lease term than you spent holding the property.
  • Security of tenure: once you are a tenant, a lease expiry or a landlord’s plans can force you to move.
  • Bank relationships: if the property was your lender’s security, losing it can change future borrowing terms.
  • Weak reasons for selling: using proceeds to cover ongoing losses, rather than to grow, tends to end badly.

Deals most often fall over for three reasons: the valuation the buyer accepts is lower than the one you expected, the two sides can’t agree on lease terms, or an existing covenant or lender restriction blocks the sale. Checking your loan documents early removes the last one.

How common is sale and leaseback in New Zealand?

It’s an established tool here. OneRoof, reporting CBRE analysis, put the potential capital New Zealand corporates could unlock at $3.8 billion, and pointed to recent deals such as Visy’s sale and leaseback in Auckland.

Smaller operators use it too. The NZ Herald’s coverage of the growing trend cites Connexwire and NZ Brush as local examples of businesses freeing capital this way. On the buying side, investors and funds actively look for tenanted commercial property with a secure lease. CR Equity explains the investor view of property income, which is the lens a buyer will apply to your premises.

How common is sale and leaseback in New Zealand? — overview diagram

What should you do before agreeing to a leaseback?

From where we sit, the lease matters more than the headline price. A strong sale price with a short, inflexible lease can leave you worse off than a modest price with secure occupancy.

Before you go to market:

  • Define exactly what the cash will fund.
  • Review your bank covenants and security.
  • Decide the lease length you need and the tenant protections you want.
  • Brief a valuer, an accountant, a commercial lawyer and your lender.

Pro Tip: Negotiate renewal options and, if possible, a right to buy the property back. Those clauses protect your occupancy long after the sale settles.

— Aaron

Want cash from your home without leasing it back?

A leaseback suits owners who need to keep using a property. If you own a home and want to leave it behind, a straight sale is simpler. We buy New Zealand homes in any condition, with no agent commission and no repairs, and you choose the settlement date. Get a no-obligation offer on our sell fast page, or look through our FAQ first.

This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.

FAQ

What are the disadvantages of a sale and leaseback agreement?

You swap ownership for an ongoing rent bill, and you lose long-term control of the property. Future bank lending can also be affected if the property was your security. The accounting treatment can be more complex than owners expect.

Why would you do a sale and leaseback?

Owners do it to release cash tied up in property while keeping use of it. The proceeds usually go to growth, debt reduction or working capital. It also hands landlord duties to the buyer.

What causes a failed sale and leaseback?

Deals commonly fail over a valuation gap, disagreement on lease terms, or lender and covenant restrictions on the sale. Checking your loan documents and agreeing the key lease terms early reduces these risks.

What is an example of a sale and leaseback?

A business sells its warehouse to an investor, receives the sale price in cash, and signs a lease to stay on site. Investopedia’s definition describes this exact arrangement. In New Zealand, the NZ Herald has reported on businesses such as NZ Brush doing this.

Sources

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