Private Equity Professionals

Improving Private Equity Returns Across the Fund Spectrum

When a pending acquisition target holds significant real estate assets, the advantages of financing the transaction with sale-leaseback proceeds can be significant. This is a natural consequence of the different methods the finance industry and the real estate industry employ value to real estate assets:

BUYOUT MARKET VS REAL ESTATE MARKET COMPARISON
Contract Price for Company:	$600M
EBITDA MULTIPLE:	6X
Real Estate as % of PP:	10%
Annual Rent (variable):	$5.4M
Annual Rent Escalation (variable):	2%
Firm's Cost of Capital:	25%
Firms Cost of Future Rent Payments:	$23.9M
Real Estate Proceeds:	$60M
Cash Value of Sale-Leaseback:	$36.1M
Buyout Market Value of EBITDA:	6X
Real Estate Market Value of EBITDA:	11X

If you are interested in evaluating a pending acquisition target or existing portfolio company's real estate assets, contact us for a prompt valuation.