In one of last year’s biggest deals, SouthState Bank in Winter Haven, Florida, completed a sale-leaseback of 165 bank locations that sold for a staggering $467 million. According to John Corbett, CEO of the $67 billion-asset community bank, “This structure unlocks significant unrealized capital on our balance sheet, further enhancing our balance sheet strength and optionality, while the long-term leases solidify our commitment to our branch footprint across all geographies.”
A sale-leaseback is a financing tool that allows a bank to sell real estate it occupies while maintaining operating control as the tenant. And some community banks are using it to monetize their real estate.
Let’s look at how sale-leasebacks work, the pros and cons for banks, and tips from experts on what to consider when engaging in a sale‑leaseback.
Q: How common are sale-leasebacks within the banking industry?
A: The banking sector has seen a surge in sale-leaseback transactions over the past three years, particularly among regional and community banks. According to data from SLB Capital Advisors, the volume of sale-leasebacks initiated by financial institutions jumped from $125.3 million in 2023 to $255.6 million in 2024 and more than $825 million in 2025.
“We are witnessing a significant surge in bank sale-leaseback activity, with 2025 volumes already surpassing the combined totals of 2023 and 2024,” says Randy Blankstein, president of The Boulder Group, a real estate brokerage firm in Wilmette, Illinois.
Q: Obviously, banks are in the business of financing. So, what’s driving that growth in sale‑leasebacks?
A: This spike in activity is partly due to greater awareness of the sale-leaseback as a financing alternative. Bankers are seeing their peers raise significant capital through sale-leasebacks, pushing the topic to the forefront. Bankers also are realizing they don’t necessarily need to own their properties to maintain operating control.
Q: Do sale-leasebacks only apply to banks with many real estate locations?
A: No. The sale-leaseback can be used as a financing tool whether it’s one or two real estate assets, or for a larger portfolio.
“A lot of banks are sitting on a ton of owned real estate and have some good optionality in terms of what they want to monetize,” says Scott Merkle, a managing partner at SLB Capital Advisors, a New York City real estate firm that specializes in sale‑leasebacks.
Q: What are the advantages of a sale-leaseback?
A: Sale-leaseback capital can help strengthen balance sheets or improve capital ratios, and they offer an attractive cost of capital advantage. Sale-leasebacks are occurring at levels that are cost-effective and accretive to bank earnings. In many cases, banks might also achieve a gain on the sale of a property, which they could use to offset securities losses they might have on their books.
The ability to extract capital from owned real estate that is just sitting on the balance sheet is another strong incentive. “Banks are able to bring in a meaningful slug of capital that they can then lend out to create a multiplier effect,” says Merkle. Also, money raised from a sale-leaseback is Tier One capital that comes in without restrictions.
Q: What about the cons?
A: Cons include long-term lease commitments that reduce branch closure flexibility and introduce ongoing rent obligations that might exceed historical carrying costs.
“Banks should recognize that sale-leasebacks are not merely real estate transactions but strategic capital tools best suited for institutions confident in their branch network,” says Blankstein. “In today’s market, they offer a compelling alternative to debt with fewer restrictions, but they require careful alignment with broader corporate objectives.”
Q: What are some of the factors that a bank should think about when determining whether a sale-leaseback is a good fit or not?
A: Key considerations include a bank’s long-term branch strategy and commitment to locations. Sale-leasebacks are typically structured with a long-term lease of 15 to 20 years. The structure might not be a good fit for a bank that wants flexibility to downsize or close a location. Banks should also ensure their lease terms preserve operational control without committing to restrictive covenants.
Q: What if a bank doesn’t want to commit to a long-term lease?
A: Although a long-term lease commitment often garners more favorable pricing, sale-leasebacks can be structured with shorter lease terms at reduced pricing due to greater focus on real estate valuations. In some cases, a sale-leaseback might be part of an exit strategy for a bank that wants to close a branch in the near or medium term, such as within three to five years. Such investments can appeal to buyers who like short terms, as they provide higher yields in exchange for taking on tenant renewal uncertainty, along with the opportunity to reposition a property with a new tenant or new use in the future. However, those shorter terms are often reflected in lower valuations.
Q: How can a bank maximize pricing on a sale-leaseback?
A: Sale-leasebacks are often more “art than science,” with pricing that is influenced more by how a deal is structured rather than appraised property value, notes Merkle. The amount of base rent, schedule of rent increases over time and the length of the lease term are all factors that influence pricing. Aside from the quality and location of the real estate, the credit quality of the bank is an important factor in attracting investor interest and establishing value.
Q: There are always market cycles. Is now a good time to be doing a sale-leaseback?
A: Real estate experts do see a very favorable window ahead. Investor demand remains high, which translates into attractive valuations and quick access to liquidity. Capitalization rates, the metric used to calculate returns for investors, have moved lower over the past several months, meaning that pricing for sellers is more favorable. Lower interest rates could also fuel more buyer interest and lower cap rates in the coming year.
“It’s a good time, and it’s likely to get even better,” says Merkle.