Deal by Deal: A Private Equity Podcast Unlocking Value with Real Estate in M&A Transactions
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Apr 15, 2025 
In this engaging discussion, Luke Timmis from Signature Associates and Phil Coover from McGuireWoods delve into the power of sale leaseback transactions in M&A. Luke highlights how these deals sell cash flow streams rather than just real estate, often fetching a 25-50% premium over appraisals. The duo explores strategic lease structures, the impact of flexibility through substitution clauses, and the intricate dynamics between buyers and sellers, revealing how savvy real estate strategies can significantly enhance private equity outcomes.
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Sale Leasebacks Unlock Capital Premium
- Sale leasebacks typically generate a 25 to 50% premium above appraised property value by selling a cash flow stream backed by a solid company.
- This unlocks significant capital allowing buyers to pay down acquisition multiple more efficiently.
Opco vs. Propco Maximizes Value
- Operating companies usually trade at 3-6x EBITDA, while real estate sale leasebacks fetch 11-20x rent multiples.
- Separating operating company (Opco) and property company (Propco) sales maximizes enterprise value for sellers.
Buyers Should Focus on Total Price
- As a buyer, focus on the overall price paid for business plus real estate rather than how value is allocated.
- Understand that the premium in sale leasebacks compensates the buyer for long-term lease commitments and related risks.