Real Estate as part of the deal

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May 29, 2025

by a searcher from Florida State University in Southampton, NY 11968, USA

I've got a deal currently under LOI that includes the real estate. Under the current equity structure, there is enough capital to take down the business but not enough to do both. My goal is to not dilute the equity structure of the operating company with a cap raise, but would expect that with the real estate. I understand the concept of a Sale/Lease back but curious what investors in that space are looking at as a cap rate? Any guidance would be helpful.
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Reply by a searcher
from Columbia University in Fairfax, VA, USA
Depends on the property, but if you can target a 10%+ cap rate, you'll definitely have buyers for a sale-leaseback (as long as the financials of the operating company are in good shape). And depending on how motivated the seller is, you could seller finance some (or all) of the property purchase, get the longer amortization (if you're using an SBA 7(a) loan and owner-occupy 51%+), and unlock multiple points of value from the real estate. You could also create a separate entity for the real estate and acquire it through a commercial mortgage to keep your cap table clean.
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Reply by a searcher
from Northwestern University in New York, NY, USA
Really depends on the type of real estate and tenant profile. Industrial, office, class A/B, etc. If you can make the math pencil at a 10% cap rate, you have pretty much all options available.
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