Why More Operators Are Choosing Sale-Leasebacks Instead of Owning Their Real Estate

One of the most misunderstood concepts in commercial real estate is the multiple created in a sale-leaseback. When an operator owns their real estate, that asset typically trades at a cap rate, which translates to a 10x to 18x multiple of rent depending on credit, lease term, and market conditions. Most operating businesses, however, trade at much lower multiples, often 3x to 7x EBITDA for small to mid-sized private companies. Here is where the arbitrage happens: If your company generates $1,000,000 of EBITDA and $300,000 of that is “rent” you are paying to yourself, that real estate may be worth $4M to $6M in today’s market. By executing a sale-leaseback: • You unlock that 10x to 15x rent multiple • Convert illiquid equity into deployable capital • Strengthen your balance sheet • Retain full operational control of the property • Often lower your weighted average cost of capital Instead of having capital trapped in dirt and concrete earning an implicit 6 percent return, you can redeploy those proceeds into: • Growth • Acquisitions • Equipment • Debt reduction • Working capital For many operators, especially those scaling, the question is not “Why would I sell my real estate?” It is “Why is my lowest-yielding asset my largest one?” Owning real estate makes sense in certain situations. But if your core competency is running a business, not being a landlord, a properly structured sale-leaseback can create both valuation arbitrage and strategic flexibility. Curious how the math works for your specific situation? Happy to walk through it. redacted