The Sale-Leaseback Offering Memorandum Is a Balance Sheet Argument

When Scholastic sold its New York headquarters and Missouri distribution center for $401 million in December, the buyers weren't underwriting a building. They were underwriting Scholastic's rent check for the next 20 years.

That's the structure problem most sale-leaseback offering memorandums have. They're written like real estate documents, for buyers thinking like real estate investors. But in a sale-leaseback, the tenant is the seller. The buyer's first question isn't "how is this building priced?" It's "can this company afford to stay here for the length of this lease?"

The sale-leaseback market gives you a reason to care about that distinction right now. SLB Capital counted 714 transactions and $14.4 billion in volume in 2025 — up 18% year over year. Q4 alone hit $4.7 billion, a 56% quarter-over-quarter spike. In 2026, private equity is the driver: PE firms are using sale-leasebacks as a post-acquisition liquidity tool, freeing up balance sheet capital after a deal closes. SLB volume lags M&A activity by 6 to 12 months. The corporate deal wave of late 2025 is feeding into the market right now.

That's a lot of deals. Each one needs an offering memorandum. Most of those OMs are going to look like standard net lease deals with a company overview page stapled to the front.

What the buyer is actually asking

In a traditional property sale, the tenant is a credit consideration. If they leave, you re-lease. In a sale-leaseback, re-leasing is the downside scenario — you own an empty building in a location optimized for someone else's operations. That's a different risk profile, and it drives a completely different set of questions.

So the buyer's analysis centers on two things. First, occupancy cost ratio: the tenant's rent obligation as a percentage of revenue (or EBITDA for asset-heavy operators). A 10% occupancy cost ratio on a growing company is sustainable. A 20% ratio on a flat one is a flag. Second, lease coverage: how does NOI compare to the tenant's overall debt service? If a PE firm borrowed 60% to acquire a company and then did a sale-leaseback to recover 20%, the tenant is still levered. That shows up either in your document or in the buyer's questions.

Most experienced SLB brokers know their buyers are underwriting credit, not real estate. The issue isn't knowledge — it's document structure. Knowing it and building the OM for it are different problems. When buyers have to build the credit analysis themselves, they use conservative assumptions. That's just how it works.

The document structure that fits the deal

A standard net lease offering memorandum opens with the property and ends with the tenant. A sale-leaseback OM should invert that hierarchy.

The investment thesis section should open with the tenant's operating profile — industry, revenue trend, occupancy cost context. If the transaction is PE-driven, explain the capital use: what is the seller doing with the proceeds, and what does it do to their balance sheet going forward? Buyers know PE firms sell real estate to fund operations or reinvest. What they need to see is whether that capital use makes the company more stable or just more leveraged.

The lease structure section matters more than in a standard net lease deal. Fixed annual bumps or CPI escalators signal tenant confidence in their ability to absorb the increases. Below-market rent at execution can mean the tenant over-negotiated, or it can mean there's embedded value in renewal spread — either way, explain it rather than letting the buyer interpret it.

Property still matters, but it's downstream of the credit story. The reason this tenant is at this location — proximity to supply chain, customer concentration, workforce availability — is part of the operating analysis, not just real estate context. A tenant who signed a 20-year lease on a distribution facility they built around their logistics model is telling you something about their commitment to the space.

Current cap rates on SLB transactions run 6 to 8%, with purchase price multiples of 12x to 17x earnings. Where your deal lands depends mostly on tenant credit. A strong investment-grade tenant is at the low end of cap rates. A growing but unrated mid-market operator is at the high end. The OM should establish where the tenant falls and why — before the buyer decides on their own.

What doesn't make it in

Most sale-leaseback OMs lead with the building's financials and put the tenant credit analysis in section five or six. By the time a buyer gets there, they've already spent most of their reading time in the wrong frame.

The Asda deal — £568 million, 24 stores and a distribution depot — wasn't a retail real estate transaction. It was a bet on Asda's grocery operations sustaining that rent load through a market cycle. An OM built around cap rate and location data doesn't answer that question. An OM built around occupancy cost ratios, coverage, and transaction rationale does.

Five things a sale-leaseback offering memorandum needs to answer clearly:

1. Occupancy cost — what percentage of revenue or EBITDA does this rent represent? 2. Coverage — how does NOI compare to the tenant's overall debt load? 3. Transaction rationale — what is the seller doing with the capital, and what does it do to their balance sheet? 4. Lease economics — are escalators fixed, CPI-linked, or flat? Who absorbs operating cost increases? 5. Operational dependency — why this location specifically, and what does that mean for re-leasing risk?

None of these questions are exotic. But they don't get answered in a standard net lease OM format. They get left for due diligence, where the buyer sets the terms of the conversation.

The SLB market is running at its fastest pace since before the rate cycle. Capital is available — $585 billion in dry powder is looking for deployment. PE-driven transactions are feeding deal flow into Q2 and Q3. The brokers who close these deals aren't the ones with the best property photography or the thickest market overview section.

They're the ones who figured out the buyer's question before the buyer had to ask it.

Start with the tenant. The building will take care of itself.