The Private Equity CFO’s Guide to Sale-Leasebacks
Unlocking liquidity from real estate assets
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At the bottom of this post you’ll get a quick round up on who’s taking the CFO seat at PE-backed companies. Scroll down for the latest from Marketbridge, Orbus Software, and Iris Software.
TL;DR: Basically, you sell an owned property to a third-party investor, then lease it back under a long-term agreement. Operational control stays the same. The only difference is that instead of owning the building, you’re now renting it (and holding more cash on your balance sheet than before).
In practice, this structure is most useful when the real estate isn’t the reason you’re buying the business. If the cash flow comes from operations, not appreciation, then tying up capital in a building is usually a poor use of funds, especially when you’re trying to stay within leverage guardrails or preserve ownership.
It can also be a hack to buying stuff that’s out of range, which we’ll get to later.
The lease is typically structured as triple-net (NNN), meaning the tenant (your company) covers taxes, insurance, and maintenance. That makes it hands-off for the real estate investor and predictable for you. From a planning perspective, it’s easier to model, and easier to explain to lenders. One price per month.
In a sale-leaseback, you’re selling the real estate at a cap rate, which is essentially the buyer’s required return on the property. Cap rate is the inverse of a multiple, and real estate buyers often accept lower returns (higher multiples) than business buyers.
An 8% cap rate means the investor is willing to pay 12.5x the annual rent (1 ÷ 0.08 = 12.5x)
Now let’s say:
The business generates $3M in EBITDA, and you paid 6x = $18M enterprise value
The facility supports $450K in market rent, and you can sell it at an 8% cap → $5.625M in proceeds
That covers about 30% of the purchase price, and brings down your required equity check or senior debt ask
You’re extracting capital from the real estate at a higher effective multiple than you paid for the business. That “spread” is the arbitrage, and it lets you:
Free up cash to fund the deal
Avoid additional debt or equity dilution
Keep your leverage ratios healthier
That arbitrage can fund a meaningful portion of the deal, without overleveraging the OpCo or raising outside equity.
Why It Works in a Roll-Up Strategy
Many founder-led businesses come with owned real estate, especially in industrial, healthcare, or services sectors. But when you’re running a roll-up play, your goal isn’t to accumulate property. It’s to build operating scale, expand EBITDA, and drive overall platform multiples. Every dollar tied up in dirt is a dollar not compounding in the portco.
That’s where a sale-leaseback becomes useful. Instead of letting real estate inflate the check size or overcomplicate the capital stack, you split the OpCo and PropCo at acquisition (or shortly after), and recycle the real estate value back into the deal.
In practice, this does a few things:
Frees up cash to fund the add-on without layering in more senior debt or delaying integration
Preserves covenant headroom by reducing overall leverage ratios
Keeps your capital focused on what actually moves enterprise value: revenue, margin, and synergies (you’re not making your returns off the land)
It’s especially helpful when you’re bidding on a high-quality asset that falls just outside your typical deal size. The real estate might be adding 1–2x to the multiple, but with a leaseback in place, you can close the gap between the platform’s valuation appetite and the seller’s expectations, without going back to your board for more equity.
That said, sale-leasebacks aren’t a fit for every deal. You’re trading a one-time capital infusion for a recurring fixed cost (the rent). The lease terms need to be durable, the rent needs to clear coverage thresholds comfortably, and the business should have minimal relocation risk.
How Rents Gets Set
One of the first misconceptions about sale-leasebacks is that the rent is based on what the business can “afford.” That’s not quite right. It’s not a debt underwriting exercise; it’s a real estate pricing exercise.
Rent in a sale-leaseback is typically set based on market comps and a target cap rate, not EBITDA coverage. The buyer, often a REIT or net lease investor, is underwriting the deal based on the expected return on the property, given the lease terms, tenant credit, and risk profile.
Example:
Say you want to extract $15.6M in real estate value, and the buyer is targeting an 8% cap rate. That backs into $1.25M in annual rent:
$15.6M × 8% = $1.25M
It doesn’t matter that you’d prefer to pay $900K (and that’s what the pet groomer next door pays); that yield won’t pencil for the investor. The rent has to support their return, or they walk.
That said, rent still needs to clear some operating thresholds:
Rent as a % of EBITDA is often capped around 15–20% in typical lower middle market deals
Pro forma lease-adjusted leverage may be scrutinized by lenders to ensure you’re not overextending the OpCo
Also worth noting: tenant credit matters. If you’re a $50M+ platform backed by institutional PE, you’ll get more favorable cap rates (and therefore higher proceeds) than a single-site LLC with limited history. That credit delta is a pricing lever.
Execution Nuances (And Where This Can Go Sideways)
On paper, a sale-leaseback looks straightforward: sell the real estate, sign a lease, use the proceeds. In practice, you’re adding a third leg to an already complex deal… and timing, communication, and control become critical.
The moving parts:
You’re running two parallel processes: Assuming you’re doing it as part of buying the OpCo, you’re doing OpCo diligence and PropCo sale at the same time… with two different buyers who care about different risks.
The seller may have emotional or strategic attachment to the real estate. If you raise the SLB late in the process, it can spook them or cause re-trading tension.
Your timeline now depends on another party. If the SLB buyer delays or changes terms, it can jeopardize your deal close.
To do this well, you need to surface the intent early. If the seller owns the property and it’s part of the valuation, make it clear in the LOI that the go-forward plan is to lease it back post-close.
Final Considerations for Operators
Sale-leasebacks are both a tool to close a deal and part of the operating reality after you close. If you’re running a PE-backed business, here’s what to keep front of mind:
1. You’re locking in a fixed cost — permanently.
You don’t get to refi rent. Once the lease is signed, that number is baked into your P&L for 20+ years. If EBITDA softens, that rent still gets paid.
2. You’re choosing a landlord — not just raising cash.
A REIT with tight reporting covenants isn’t the same as a family office that leaves you alone. Poor alignment here shows up later… in maintenance disputes, denied facility upgrades, or blocked subletting. You should vet the counterparty of the real estate portion of the deal like you would a minority investor in the deal itself.
3. You’re locking yourself into locations.
If your integration strategy includes consolidating warehouses or facilities, be careful. A long-term lease can handcuff your ability to optimize the footprint later. Ask yourself if you can still operate the value creation plan if you are stuck in that physical location for 20 years.
4. It will affect your next deal — and your next buyer.
Above-market rent, inflexible lease terms, or no subletting rights? That all gets re-underwritten at exit. And if the next buyer doesn’t like what they see, your multiple will reflect it. You’ve got to build lease terms with the next owner in mind, not just this one.
5. It changes how EBITDA is interpreted.
SLBs shift expense categories: depreciation and interest go down, rent goes up. Some buyers or lenders will normalize for that. Others won’t.
Like any tool, sale lease backs can be used for good and bad. Done well, a sale-leaseback keeps your capital where it creates value (inside the OpCo). Done poorly, it’s a fixed cost that outlasts your hold period. Know the difference.
Leveraged Moves
Recent C-suite shifts across the private equity landscape… because people moves are performance levers too.
OffSec, a leading provider of continuous professional and workforce development, training and education for cybersecurity practitioners, named Ian Charles as CFO. Charles is a seasoned finance leader who has guided financial operations for companies such as Filevine, Scoop Technologies and Planful. OffSec was acquired by Leeds Equity Partners last October for an undisclosed amount.
X-energy Reactor Company, LLC, a leading developer of advanced small modular nuclear reactors and fuel technology, appointed Daniel Gross as CFO. With extensive experience in energy finance, clean energy investment and large-scale capital deployment, Gross will oversee he company’s financial strategy following X-energy’s completion of an oversubscribed $700M Series D financing round led by Jane Street, from new investors including ARK Invest, Galvanize, Hood River Capital Management, Point72, Reaves Asset Management, XTX Ventures and others, with existing investors including Ares Management funds.
Michele Allen was appointed CFO of sandwich chain Jersey Mike’s. Allen joins the company from Wyndham Hotels & Resorts, where she held several financial leadership positions, most recently CFO and Head of Strategy. In January 2025, private equity giant Blackstone completed its $8B majority stake purchase of Jersey Mike’s.
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