Why would a PE firm choose to do a sale-leaseback after acquiring a company?

A sale-leaseback involves selling property ownership to a third party and then renting that property back from that third party at a rate that was previously agreed upon. This is also a common way to generate cash to fund other projects. Companies may also wish to do this to reduce their real estate risk and focus on the core business, since real estate may be outside of the PE firm’s expertise, and they may not want to be exposed to the ups and downs of the real estate market. Paying a lease is also tax deductible. Finally, it is easier to forecast a fixed lease payment versus the costs of ownership such as maintenance, property tax, and insurance, which can have more variability.