What is a leaseback arrangement for a REIT?

A leaseback arrangement for a Real Estate Investment Trust (REIT) involves a transaction in which an owner sells a property and then immediately leases it back from the buyer. This arrangement allows the original owner to free up capital from the sale while retaining the ability to use and operate the property. It is a strategic move often used by businesses to improve liquidity without losing access to essential facilities or locations.

In this scenario, the REIT benefits by acquiring properties that they can lease to tenants, generating rental income. The arrangement provides financial flexibility to the seller while also allowing the REIT to expand its portfolio without the need to construct new buildings or properties.

This concept is quite common in commercial real estate, where businesses may prefer to sell valuable assets while continuing to occupy and utilize them through leasing, thus efficiently managing their financial resources and operational needs.