Sale-Leasebacks
Disciplined, Well-Marketed Sale Processes for Owner Operators
WHAT WE DO
Sale-Leasebacks
A sale-leaseback is a transaction where the Operator, who is also the Property Owner, sells their property and simultaneously signs a brand-new lease with the Purchaser – the Operator then becomes the Tenant, while the Purchaser is now the Landlord. This allows for the Operator to access the equity tied up in the real estate while continuing to run the business without interruption.
We believe that a sale-leaseback transaction can be an extremely valuable tool for operators when utilized correctly. Only after a thorough analysis which takes into account the Operator’s current and future needs can this determination be made.
The Process
Every sale-leaseback follows the same process from Owner to Tenant, but the terms negotiated along the way determine its value. We make sure those terms work for the Operator.
Benefits of a Sale-Leaseback
Capitalize on your real estate: free-up equity, boost valuations, retain control, and cut risk.
01
Free-Up Resources
Unlock equity and capital for operations, development, new acquisitions, or outside ventures.
02
Extract Maximum Value
The whole is often worth less than the sum of its parts. We help operators capture full value by selling the business and the real estate to the buyers best suited for each.
03
Control
Dictate the terms of the lease and control operating expenses.
04
Exposure
Reduce long-term exposure to a particular brand, concept, or network.
It Takes a Team
Our team has collectively been involved in numerous sale-leaseback transactions for clients ranging from first-time operators to Fortune 10 companies.
Utilizing our collective experience, we take a methodical and programmatic approach to assisting our clients in the sale-leaseback process and working in conjunction with their counsel, accountants, estate planners, and other advisors, to achieve the best results.
HOW WE DIFFER
ACA vs. The Competition
Entering into a sale-leaseback transaction can have both short and long-term implications, yet we've found that most other firms simply don't account for
operator-specific needs and goals — often because they don't understand the
underlying business, or because they're chasing a quick sale, or both.
That's why we take the time to build customized solutions that address every
component of the structure, ensuring it aligns with your needs, goals, obligations,
and long-term strategy.
ACA
Client Needs and Goals
Client Ownership Structure
EBITDAR Coverage Ratios
Lease Types
Financial and Sales Reporting
Rights of First Refusal and Triggers
Impact to Operations Marketability
Brand Type, Size, and Common Transactions
Competition
Generic Lease Terms
3rd Party Purchaser Marketability
Rent-to-Sales Ratios
How We Differ From The Competition
Entering into a sale-leaseback transaction can have both short and long-term implications. We've found that most other firms simply don't account for operator-specific needs and goals, often because they don't understand the underlying business, or because they're chasing a quick sale, or both.
That's why we take the time to build customized solutions that address every component of the structure, ensuring it aligns with each operator's needs, goals, obligations, and long-term strategy.
The chart below provides examples of the extent to which we differ from our competition in the sale-leaseback structuring process:
ACA
Client Needs and Goals
Client Ownership Structure
EBITDAR Coverage Ratios
Lease Types
Financial and Sales Reporting
Rights of First Refusal and Triggers
Impact to Operations Marketability
Brand Type, Size, and Common Transactions
Competition
Generic Lease Terms
3rd Party Purchaser Marketability
Rent-to-Sales Ratios
Sale-Leaseback Structures
Fee Simple
A sale-leaseback of both the land and building, wherein the Operator does not retain any ownership.
Ground Lease
A sale-leaseback of just the land, allowing the Operator to retain ownership of the building, unless and until they vacate.
Sale-Leaseback vs. Finance
Sale-Leasebacks
Financing
Predictability
Rent is fixed, leases can extend for 50+ years when factoring base term and options
Loans are typically only fixed for a maximum of 10 years, making a borrower susceptible to market conditions at the time of maturity
Operator Obligations
Ability to customize default conditions and landlord rights
Limited ability to negotiate borrower loan covenants
Financials
Ability to structure with no ongoing net-worth or liquidity requirements
Lenders often require borrowers to keep deposits with the lender, as well as maintain a certain amount of liquidity
Expenses
Ability to fully deduct rent expense
Ability to deduct just the interest component
Equity Requirement
Ability to extract 100%, or more, of value
Lenders typically will only lend to a maximum 75% loan-to-value
Value Creation
The value multiples of a transaction which includes the sale of both the operations and real estate is often outweighed by the value of selling both components separately.
SALE-LEASEBACKS
Lease Development
WHAT WE DO
Simultaneous Sale-Leasebacks
In connection with an acquisition which includes both operations and real estate, an Operator may assign the right to purchase the real estate to a third-party. The third-party will purchase the real estate concurrently with the Operator’s purchase of the operations.
Assignment Fee
Can be used for remodels or to reduce the equity requirement for a transaction.
Locked-in Terms
Ability to control lease terms and manage overall occupancy costs.
Closing Costs
Reduced closing costs on the initial transaction as well as what would have been a subsequent sale-leaseback.
Equity and Capital Preservation
Preserve equity and capital resources for other opportunities.