Case Study Car Wash Sale Leaseback to Fund Acquisition

Background: The Ascension Team represents a private equity owned regional express car wash operator based out of the Detroit metro area. The private equity firm was evaluating the acquisition of the 9-unit chain, and our team approached the sponsor with the idea to finance part of the business acquisition with proceeds from the sale leaseback of the 9 owned sites.

Client Objective: The sponsor was interested in exploring the sale leaseback given the substantial arbitrage between the cap rate multiple and the business acquisition multiple. Our team had already approached a sale leaseback investor directly and received an offer for the sale leaseback, however our team was confident that through its competitive marketing process, it could generate a substantially better deal for the sponsor.

Solution: The private equity firm allowed our team to run a full investor outreach process, and our team brought in 12 offers for the sale leaseback, among private capital investors and the institutional REITs and funds. The sponsor decided to move forward with the original buyer given the existing relationship, but the terms of the sale leaseback were significantly improved through our team’s marketing process. The cap rate on the deal was 45 bps tighter than the buyer had initially offered on a direct basis. Our team successfully closed the 9-unit portfolio sale leaseback transaction in conjunction with the business acquisition at a purchase price of $45 million.