Unlocking Value with Sale Leasebacks for Auto Dealers

Sale Leasebacks (SLBs) are powerful strategic tools for auto dealers, offering significant financial and operational benefits. Dealerships often choose sale-leasebacks to leverage the difference (arbitrage) between their business's EBITDA and the real estate's effective multiple.

Understanding the Arbitrage Opportunity

Average sale-leaseback cap rates suggest real estate multiples typically range between 12x – 16x. When an auto dealer's EBITDA multiple is lower than this real estate multiple, executing a sale-leaseback can create substantial value for the dealership owner.

Key Reasons Auto Dealers Consider Sale Leasebacks

General Strategic & Financial Drivers:

• Focus more resources on your core competencies.

• Redeploy capital to fund internal growth initiatives.

• Improve your dealership’s overall blended cost of capital.

• Enhance balance sheet management, boosting financial agility.

• Transfer and mitigate residual real estate risk.

• Effectively manage relationships with core stakeholders—shareholders and analysts.

M&A-Related Factors:

• Prepare effectively for future business sales.

• Capitalize strategically on value arbitrage between business operations and real estate.

• Reduce or "buy down" your equity multiple, enhancing equity returns.

• Secure financing for acquisitions more efficiently.

• Maximize your dealership’s aggregate valuation within an M&A scenario.

• Gain a competitive advantage over other bidders not utilizing SLBs.

Discover how a tailored Sale Leaseback solution can unlock hidden value in your dealership and provide a pathway to greater financial flexibility and operational efficiency.