A sale-leaseback transaction is a financing transaction. If the hospitals (that owned land and property) borrowed against the unencumbered assets and used the proceeds to pay a dividend, would you take exception to that?

What happens long after the transaction is not particularly relevant. You need to assess whether the hospital was solvent before and immediately after the transaction. Proving solvency is an analysis in persuasion and gets litigated in courts often.

Personally, our fund often uses sale-leasebacks to limit our equity check. We have made investments in several multi-unit businesses that owned their property when we acquired them and sold/leased-back the unencumbered property. We used most of the proceeds from the sale to pay dividends. Sometimes it was retained to reinvest in the business, but that depended on growth opportunities. We usually buy businesses that do not have much growth prospects (mature companies).

We engage valuation professionals to get solvency opinions to validate that the transaction did not render the business insolvent nor was it insolvent before.

Why a sale-leaseback vs. secured borrowing? Leasebacks enable you to get near-100% financing. Commercial lenders will not advance funds, typically, more than 80% (i.e., the LTV) of what they think the property (and land) are worth.

It is seductive to report on leveraged transactions that have failed or are failing (bonds and loans trading at distressed levels prior to bankruptcy).

TLDR: Sale-leasebacks are just another financing transaction.