Why Sale Leasebacks Work

The arbitrage

Companies consider sale leasebacks for a wide range of reasons

There is often an underlying arbitrage to be captured between the business EBITDA multiple and the effective real estate multiple. Average sale leaseback cap rates imply multiples of 12x – 16x. In cases where a company’s EBITDA multiple is lower than the real estate multiple, value can be created for the owner by executing a sale leaseback.

Sale leaseback drivers

Some of the many other sale leaseback drivers

General Strategic & Financial Drivers

Operational and balance sheet reasons to monetize owned real estate.

  • Focus on Core Competency
  • Redeploy Capital for Internal Growth Initiatives
  • Improve Blended Cost of Capital
  • Balance Sheet Management
  • Transfer/Mitigate Residual Risk
  • Managing Core Constituents – Shareholders, Analysts

M&A-Related Factors

A sale leaseback is often a material component of a transaction.

  • Preparing for a Business Sale
  • Capitalize on Value Arbitrage
  • Buy Down the Equity Multiple
  • Acquisition Funding
  • Maximize Aggregate Valuation in an M&A Context
  • Gain Advantage Relative to Other Company Bidders That are Not Factoring in an SLB
What We Do What Is a Sale Leaseback?

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