In this episode of the M&A Launchpad Podcast, Casey Minshew sits down with Bryan Huber, Partner at SAB Capital, to explore the intricacies of sale leasebacks in the context of business acquisitions. Bryan breaks down how these transactions work, why they’re such a powerful tool for freeing up capital, and how they can improve business valuations. The conversation highlights underwriting considerations, the importance of quality of earnings, and the flexibility required when structuring deals. They also touch on lease agreement implications, financing strategies, and negotiating purchase options that protect future acquirers.
In this podcast episode, we discuss:
- How sale leasebacks can unlock capital in acquisitions
- Why understanding the mechanics is crucial for acquirers
- The role of quality of earnings in financial diligence
- How sale leasebacks impact business valuation and flexibility
- Underwriting considerations: tenant creditworthiness & lease structure
- Geographic and market demand for sale leaseback transactions
- Financing strategies that don’t limit future borrowing capacity
- Negotiating purchase options to mitigate risk
Key Takeaways
- The M&A Launchpad event is a must-attend for anyone buying, selling, or scaling businesses.
- Evaluating digital marketing strategies is essential for business buyers.
- Understanding digital assets can prevent costly mistakes during acquisitions.
- Financial health and quality of earnings are critical in M&A.
- A strong digital presence can significantly increase business valuation.
- Buyers should ask the right questions about digital assets before acquisition.
- Post-transaction integration of digital strategies is key to a successful transition.
- AI is changing the digital marketing landscape rapidly.
- Blue-collar businesses need to start building their digital presence early.
Connect with Bryan Huber
LinkedIn: https://www.linkedin.com/in/john-bryan-huber-47453755/
Additional Resources
The M&A Launchpad Conference – Join us on October 25, 2025 in Chicago for a one-day, high-impact event designed for acquisition entrepreneurs, investors, and operators who are serious about buying, selling, and scaling businesses. The agenda is packed with actionable sessions, curated networking, and access to industry experts who are actively doing deals. Space is intentionally limited to keep the event impactful, so attendees can connect with the right people and walk away with real opportunities. Secure your spot today at www.malaunchpad.com — use code LAUNCH for $150 off your ticket.
O’Connell Advisory Group
Work with a trusted Quality of Earnings and Financial Diligence partner who focuses solely on business acquisitions.
Schedule a discovery call with Patrick of O’Connell Advisory Group—your dynamic Quality of Earnings partner.
Visit: www.oconnelladvisorygroup.com
- Get in touch with show hosts Casey Minshew and Feras Moussa at info@equity-launchpad.com
Looking to invest in M&A opportunities or partner with an advisor to acquire, scale, or sell your business? Visit www.equity-launchpad.com
- Access our archive of video interviews on YouTube: https://www.youtube.com/@MALaunchpad
- Connect with show hosts Casey Minshew and Feras Moussa: info@equitylaunchpad.com
Learn more about Equity Launchpad: https://www.equity-launchpad.com/
Additional Resources:
- Access our full archive of podcast and video interviews on YouTube: https://www.youtube.com/@malaunchpad
- Connect with the hosts at Equity Launchpad: info@equitylaunchpad.com
- Learn more about M&A opportunities: https://www.equity-launchpad.com
�� Have a question or want to work with us? Reach out to Casey and Feras: info@equity-launchpad.com
🎧 Podcast on YouTube: https://youtu.be/ZxUbiTRQkPQ
🎧 Podcast on Spotify: https://open.spotify.com/episode/2Vbt7h7HENrvamZROEJatE?si=50ZJh75rTe24zOdMUdGxZQ
🎧 Podcast on Apple: https://podcasts.apple.com/us/podcast/unlocking-capital-with-sale-leasebacks-with-bryan-huber/id1740382586?i=1000728601443
Transcript
00:00 Hey there, this is Casey with the M&A Launchpad podcast. Want to let you know about October 25th. Put it on your
00:07 calendar. This is a do not missed one day event. There’s going to be incredible headliners, but really at the
00:14 end of the day, you’re going to get a chance to talk to people that have made acquisitions, learn from some of the
00:19 challenges that they’ve made because this is definitely a challenging process. But more importantly, there’s going to be people there that can help
00:26 you and support you along the way from great vendors, quality of earnings, how to run the due diligence process, and
00:32 how do I get financed, how do I raise capital, how do I structure all of these things. October 25th in Chicago, we’re
00:39 going to be gathering. It’s going to be hundreds of people that are all focused, like-minded people. And man, everyone
00:45 that’s come has given us incredible feedback. So, mark your calendar. October 25th in Chicago. We look forward
00:51 to seeing you there. All right. On today’s episode, we interviewed Brian Huber where we did a deep dive into what a sell lease spec
00:57 looks like. If you’re out there looking to buy a business and there’s a piece of real estate attached, right? It’s not something to get scared of. It’s really
01:04 about can you structure something that actually can make it a very, very valuable part of the transaction. So,
01:09 Casey, what were some of your takeaways? You know, I’ve got a chance to meet Brian personally. He’s going to be sponsoring our Chicago event. I mean,
01:15 just a great guy. Um, but you know, one of the cool things that you find in this sale lease back world, which I’m
01:21 relatively new to the conversation, if if you’re for hearing it for the first time, don’t be shocked. It’s it’s different. But there’s just there’s a
01:28 lot of different things that can happen inside of a deal. And as you’re structuring a deal, and a lot of times
01:33 we just kind of look at the real estate, put it to the side, and we go, “Okay, we’ll just pay rent or we’ll do these things.” But if you start adding into
01:40 your repertoire, you know, not only do I understand how this financing works, not only do I have this structure works, but
01:45 now you’ve got another tool which is called sale lease back, which that sell lease back opportunity can free up some
01:51 capital instead of having to bring investors in uh you and making it dilutive. You you’ve got it you’ve got a
01:57 a vehicle to find some more cash. And so, man, to me, it’s just a beautiful
02:02 tool. I keep learning more about it because there’s a lot of facets to it, but man, there’s a lot to it. No, agreed. And you know the silly spec
02:08 it’s a little bit more of a complex tool but it’s a very very powerful tool. So make sure if you’re out there actively
02:15 looking to buy a business is that you understand it because again it could really turn some deals that may not you know pencil out into something that
02:21 great and just home runs. And so lots of details on that in this episode. [Music]
02:30 Hey guys, go ahead and just pause the podcast for a second. When you’re buying a business, you need to ensure the financial health of the company. The
02:36 quality of earnings is missionritical. It doesn’t matter what size business you’re buying. Patrick O’Connell Advisory Group. They’re dynamic. They do
02:42 a great job. They’re going to look over your shoulder. They’re going to make sure that you’re doing the right thing. And this guy’s done over 200 buyers
02:48 successfully just like you. So, reach out to them and it’s okconelladvisorygroup.com. Click the link in our show notes. Can’t
02:54 live without. Hey Brian, welcome to the show. Hey, Ferris. How are you? I’m good. I’m good. You know, just
03:00 another day in paradise. So for for those listeners today, right, we’re going to talk about you and kind of your
03:05 company and what does a sell lease back look like? And so for the listeners, do you mind just giving people a brief overview on kind of yourself and the
03:11 company? Yes, of course. So I’m a partner with uh with SAB Capital. We are headquartered
03:18 in uh in New York and uh by trade our organization is uh is real estate
03:24 brokerage and what we specialize in is single tenant uh net leased assets. So
03:33 um that can come in the form of office retail uh and industrial properties. And
03:39 the way we cover the marketplace um is twofold. We work with real estate
03:44 investors that are buying, selling, developing um your traditional national
03:51 tenants. So, think Chick-fil-A, FedEx, 7-Eleven, uh McDonald’s, very iconic uh
03:58 high high-grade uh investment class uh tenants. My side of the house, um I lead
04:05 the the sale lease back division. Um so I work specifically with um companies
04:13 that exist to make products, provide services andor uh administer care. And
04:20 often we’re advising uh acquirers of of operating companies and educating them
04:27 on how they can use their acquisition candidates uh real estate more
04:33 effectively uh by improving the the leaseold quality of the owned and and
04:39 leased properties and using that as a source of of acquisition financing. the
04:45 sale lease back asset category of of net lease commercial real estate. You know,
04:50 when I started in the industry was an $18 billion market cap. Today, it’s
04:55 exploded to about 30 to 35 billion. So, basically, there’s a a $30 billion
05:02 demand stream of uh you know, real estate investors that want to pay
05:07 acquirers of companies to keep these tenants in their buildings. and that can
05:12 be used as uh a source in place of traditional financing like SBA debt
05:19 equity um and and other forms of of traditional financing. So I’ll pause there and uh you know feel field any
05:26 questions that you have a million questions you know I and I just want to say I’ve gotten to know you really well Brian so you know appreciate
05:32 you joining us today. Um I will say man I was introduced to a sale lease back uh probably about 18
05:38 months ago. I I being an entrepreneur, acquisitions, all those great things.
05:43 When you’re in the SBA world and you’re in the some some of the smaller SBA, you know, SMB type loans, you know, the sell
05:49 lease back isn’t a conversation. But as we got into bigger acquisitions, we
05:54 realized that this thing called a sell lease back, right? It beca it’s an actual very viable tool that can help
06:01 people out. So just in short terms for our listeners, let’s just break it down
06:07 really simple, right? And really quick, just to add, right, to Casey’s point, most listeners, if
06:12 there’s a piece of real estate involved in a business, one of two things happens. They figure out how can I bake that into my SBA loan and there is a
06:18 path there if it’s smaller, the alternative option is, man, this is too big. I can’t buy the real estate. You
06:24 know, if the seller wants to sell the real estate, well then you’re kind of in a bind, right? But the sell lease back is the tool to really unlock that. So we
06:31 kind of dive into that now. Yeah, exactly. Or or the alternative is
06:36 you know I’m I’m an acquirer of companies and uh you know I I don’t want
06:41 my capital tied up in in land and buildings because uh you know I I want
06:46 my assets uh exposed my capital exposed to the operating company I’m buying
06:52 based on you know multiple of cash flow. I want to improve that cash flow and
06:57 then I want to exit uh for uh for a higher multiple than than I paid. And
07:03 you know I think that’s where we should probably start with um you know the the sale lease back a
07:08 vehicle in tool. Yeah, let’s break it down. In commercial real estate uh the
07:14 language is is cap rates uh and in M&A the language is uh is multiples. And you
07:20 know the reason a a sale lease back um can be in a creative uh strategy for for
07:27 financing and acquisition. You know let’s take um a a glazing business that
07:32 we structured a sale lease back for um in 2022. It was a Dallas-based um lower
07:39 middle market private equity sponsor uh add-on to an existing platform.
07:45 And uh you know this this uh glazer did uh did work for um you know educ
07:53 predominantly education and uh and this add-on was stained glass windows. So it provided them uh with an opportunity to
08:01 enter you know the the religious market. So, it was a small add-on, uh, $5 million,
08:07 came with, you know, a 30,000 foot building, and, uh, basically, we used
08:13 the tenency and the lease commitment that the sponsor, uh, you know, was was
08:19 going to sign on for, uh, to finance the acquisition where
08:25 that uh, the sale lease back provider showed up at the closing table with uh,
08:30 $3 million. So, basically, you know, financing more than 50% of the add-on um
08:36 by just, you know, signing a long-term lease and and putting that in place uh in order for uh you know, the the equity
08:44 sponsor to not have to draw on debt uh or uh draw out equity or take on uh you
08:51 know, incremental debt toward toward that platform. Yeah. And actually, let me pause you there, right, just to kind of really get
08:57 the get our listeners around this lease back. What are you doing? you as the acquirer are selling that rights to that
09:05 building to a institutional or quasi institutional company through Brian, right? And they are buying it and paying
09:11 you based on the rents that you are paying. And what’s the the power here, right, is a couple things. It’s a it’s a
09:17 way to transact the real estate. So, if you have a seller that wants to offer the business and the real estate, it gives you a path to sell it. But B, and
09:24 more importantly, right, it’s a way to not only get stability in the lease, but
09:30 a way to convert your multiples on a business into real estate caps, right,
09:35 which are much better. And so a dollar in a business at a 4x multiple really can be converted into 10 $15 in a real
09:43 estate valuation. And so it’s a way to use that as a opportunity to get cash
09:49 out in that process to then apply to buying the business. Right, Brian? Did I capture that succinctly as as possible?
09:56 Precisely. Yeah. Take the Glacier example. I mean, keep it. So, the Glacier, right? Guy wants to buy they want to buy an add-on.
10:03 So, they’re going to buy an add-on business. Let’s just say what was it? Uh $10 million purchase. $5 million purchase.
10:09 Did that include the real estate or didn’t include the real estate? That includes the real estate. They’re paying um you know, three and a half,
10:16 four times. And then you know we’re able to monetize the real estate to a sale lease back investor that’s looking for a
10:23 fixed income you know return and uh they’re paying you know a rent multiple
10:28 the inverse of the cap rate of you know close to to 10 to 12 times. So while yeah we are going to be encumbering the
10:34 the P&L with a little bit more fixed cost because we’re able to monetize that asset at a higher multiple um you know
10:41 this is an accreative avenue to uh to finance acquisitions. Yeah. So for every dollar you take off
10:47 of the P&L, right, because your rent is going up, you’re being given $12
10:53 immediately, so to speak, right? 10 to 12, kind of like you said, right? Whenever you do the inverse of the cap rate,
10:58 precisely. And that’s the beauty of that arbitrage, right? Now, now they able to buy the
11:03 company. They probably were able to get a loan for three million, not have to bring that additional equity to the
11:08 table and and purchase the new business. Or they had the cash. They had three million in cash. They just didn’t have five. So, they were able to use that
11:15 that lease back and make that acquisition. Yes. You know, another another example
11:20 of this is uh you know, one we’re working on right now in uh in Pennsylvania. It’s um a business, you
11:28 know, Casey, I think you’ll appreciate this uh because the profile of of the business owners. two 70-year-old
11:34 gentlemen um that uh have been in business together 40 years, been in this building for 30, do about you know 10
11:42 million of uh of revenue and you know consistently like you know one and a
11:47 half million of uh of ebidar and uh you know the equity sponsor that’s
11:52 purchasing this business you know the way they’ve been able to structure it it’s about a 9 to10 million buyout um 4
12:00 million of SBA debt uh2 two million of of seller note and then the sale lease
12:06 back is uh you know is going to contribute about high two million three million um you know so for you know
12:14 firsttime uh business buyers um that don’t have a lot of resources or don’t
12:19 want to take on the dilution of uh equity partners you know this this was
12:24 an accreative strategy um you know to use the real estate offer a lease on it
12:30 and uh have it contribute toward uh for the capital stack. And Brad, do you think that that’s where
12:36 SABIT and what you guys do kind of makes y’all so special, which is, you know, the normal like when I was introduced to
12:43 sell these back, it’s almost like, hey, it’s got to be it’s got to fit this box. It’s got to look like this. It’s got to
12:48 have this much ebeta. It’s got to have this. Do you guys just kind of make Are you really flexible in regards to
12:54 getting these done? Have unique ways to get it done? Because it sounds like what you’re talking about right there, right? It’s 10 million revenue business. It’s
12:60 not it’s not some unbelievably, you know, large business that you have to go to some massive institution to maybe buy
13:06 these leases, but you’re able to help that person get that $10 million business done because you guys are it’s
13:13 you just got to be real creative, right? You got to be able to find those partners that are willing to take that lease.
13:19 Yes. So I think you know what uh what differentiates SAB in the marketplace
13:24 you know relative to to other um sale lease back placement advisors is that um
13:31 you know we’ve adopted approach where we’re we’re true transaction professionals and uh you know I often
13:38 like to relate it to you know the the quality of earnings report right at QOV
13:43 um you know why would you not be diligencing your uh your your acquisition targets
13:50 uh owned and lease properties to to the same standard. And you know what what we’re doing um you know on a a pre LOI
13:59 uh basis is you know taking a look beneath the hood um seeing what rents
14:05 are in uh in the subm market and you know making a recommendation on how much
14:11 you know the uh the business rent the business can support but also you know what’s geographically uh replaceable and
14:19 I think what’s unique about you know where we sit um being in New York and uh
14:25 you know having access to private investors in in 1031 exchanges that uh
14:32 you know often the the options that they’re looking at are investment grade tenants. Think of uh you know the
14:38 7-Elevens, McDonald’s that I referenced earlier and the cap rate yields on those
14:43 are are super compressed you know call it four to to 6%. Um, you know, so for
14:49 those private investors that are, you know, looking for a little bit more yield, um, you know, to to diversify
14:55 with their portfolio, um, we have a dedicated, uh, 1031 placement team at
15:01 SAB that, uh, my business partner, uh, Michael Scally runs, and that’s all he
15:06 does. He works with firsttime triple net lease buyers and educates them on, you
15:11 know, the different fruits, flavors, and and categories of properties, geographies. uh but most importantly the
15:18 credit composition of of the entity guaranteeing the lease. And for investors that you know are are buying
15:24 multiple properties, sure they might buy that McDonald’s at a four cap to have that stability uh and that you know
15:31 reliable rent roll um but they might also you know want to add some some yield to that portfolio. So where we’ve
15:38 been effective on some of these um you know smaller uh SMB transactions is is
15:44 bringing that uh category of uh of sale lease back providers to these properties
15:50 doorsteps and minimizing the the execution risk um and uh you know
15:56 providing more certainty and and maximizing value. So yeah maybe let’s ask some questions
16:01 around it right. So, you know, have you done the holy grail of sell east leaseback, which is I’m a buyer. I find
16:08 a business and I essentially agree to buy the real estate and the business from the owner, but get it 100% financed
16:16 through the sell lease back and essentially buy the business for close to $0. It’s a really great question.
16:23 Uh, yes and no. Um know in the context
16:28 that in a um in a platform investment
16:34 that’s very challenging uh to to pull off because if you know the acquirer
16:41 does not have any quote unquote skin in the game any of of their capital um at
16:47 risk. You know, basically what you’re asking the the sale lease back provider to do is to
16:55 take on equity- like risk with upside w without any upside. Their upside is, you
17:02 know, is capped at the the lease stream uh that they will be collecting over um
17:08 you know, the course of of their ownership of that property. Um so often
17:13 you know the the sale lease back investors don’t like to to take on that level of risk because they don’t you
17:20 know your landlord is not uh an equity partner. Your landlord is not a lender.
17:25 So they don’t have any control over you know the operating assets and the ability to dictate uh and and mitigate
17:32 the success of of that tenant in that organization. So I think you know that’s
17:37 that’s one of the beauties of of the sale lease back tool. It’s, you know, your, like I said, your landlord’s not
17:43 your your equity partner. Um, and a lease doesn’t have covenants that, you know, a loan would typically require and
17:50 usually it doesn’t require uh personal guarantees or personal recourse. Um, but
17:56 in the instances where, you know, sponsors putting no equity in in the
18:01 transaction and all that’s challenging. However, um, we have been able to successfully do that with add-on
18:08 acquisitions. Um so for instance ah got it got it
18:14 there’s an existing uh lease guarantee and platform that we can leverage and
18:21 you know that platform is able to bolt on a smaller business for say you know
18:26 $5 million and you know we’re able to make sense of the rents and cap rate scheme for $5 million. uh you know
18:34 that’s where we’re able to fund 100% of of add-on acquisitions. But the um sales
18:42 back provider is often going to want to see that, you know, there there’s a meaningful uh equity contribution in in
18:48 that platform and they’re comfortable with that risk because they’re not just getting the lease guarantee of that
18:53 small business that’s getting added on to to the platform. They’re getting the platform level guarantee. So there’s
18:59 there’s more diversified uh exposure, you know, on on their ability to uh to collect rent.
19:06 Got it. And so so maybe let’s dive into that a little bit then. What I guess what is the smallest sell lease back
19:13 that can be done? And I don’t know if that’s in terms of purchase price of the business of the the real estate or is it
19:19 in revenue of the business? It’s kind of conversation that Casey and I actually had a couple days ago. And so what do
19:24 you guys look at in terms of size or maybe your institutional buyers, right? like is there a a size limit? Because
19:29 I’m thinking, you know, some of our listeners, they’re searchers. They’re maybe looking at, you know, a business that does $3 million of revenue and
19:35 maybe owns a $750,000 piece of real estate. Is that something that is still
19:40 lease backable, right? And kind of how do you guys look at that? Sure. So, I would say it depends on on
19:45 geographic density um and and property category, right? So why I think that’s
19:52 important um geographic density like if that building is in Wadley Alabama uh
19:59 versus Lakeland Florida um you know the the you know ability um for that
20:06 landlord to take on that risk and retenant that space in the event that
20:11 you know the uh the legacy tenant that they’re doing the sale is back with uh
20:16 defaults for whatever reason. um you know the probability of of relitting that space is much higher in in
20:22 Lakeland. Um so thinking back you know early in my career um there was a small
20:28 add-on that we did actually in Lakeland Florida. It was for um like an IT
20:34 service business and uh they did you know back office uh had a small uh data
20:41 center so 30 you know very very small um like 3,000 square foot office condo. Um,
20:48 so that we did that transaction. It was like a $750,000 sale lease back back in 2018, 2019. Um,
20:57 so I would say, you know, geographic density played a role there because there’s if you got the building back,
21:03 there’s there’s tenants that would be knocking on your door to to lease the space. Um, and then also plate size,
21:10 right? So that’s why I said earlier um we have to think about uh you know
21:16 office industrial versus retail you know office single tenant office. So I’m not
21:21 talking about professional office high-rise office like in Dallas or or New York but medical office buildings
21:28 daycare centers you know autism clinics that you know span call it 3,000 to you
21:34 know maybe 20,000 square feet of of single tenant single story freestanding
21:39 space. the price points on on those transactions, you know, will more likely range in the the$1 to3 million um domain
21:47 because we just don’t have uh the square footage to to spread the rent around. Um
21:53 whereas, you know, with industrial properties, when we’re talking about 50 to, you know, 500,000 square feet,
21:60 there’s there’s a lot more rent to to allocate uh across that footprint. So, that’s that’s where the price points um
22:06 get bigger. So what I would say to to answer your question for industrial um it’s probably about $2.5 million for
22:16 office and and retail it’s probably about a you know a million dollars with the you know asterric depending on
22:22 geographic density and does it also it also depends on the business itself too right there’s almost
22:29 like multiple layers right so you say okay a million dollars on you know single office single tenant type office.
22:37 However, the business also has to be able to not only support today’s rent, but it’s got to have a business plan to
22:44 to keep up because that rent goes up two and a half, 3% every single year. So, you’ve got to also be able to support
22:50 that. So, I imagine there’s another component to it other than just the real estate. Yeah. No, Casey, great great question
22:56 and I’m glad you’re bringing it up. Um because I would say like the the three
23:02 commandments to underwriting any sale lease back boil down to three variables.
23:07 Uh number one the the credit composition of um you know the entity guaranteeing
23:13 the lease. So like how much revenue and and does the business do? Um number two
23:19 is going to be the the lease structure. Um so is it a 10-year term, a 15-year
23:24 term, a 20-year term? uh the longer the length of the lease commitment and the
23:30 escalation structures that you’re talking about like you know are they 2% 3% are they CPI
23:37 um you know so how does uh how am I protected against inflation as as the landlord um and then you know number
23:45 three is is the real estate like where’s where’s the business located um and what
23:51 corner is it on in in that subm market I would say like that third variable is
23:56 usually the the least important um because you know when I see a lease back
24:02 investors signing a 15 or 20-year lease like that’s a bet on on the teny um so
24:08 often you know what they’re doing to underwrite and and mitigate that risk and and what we’re underwriting uh for
24:15 you know when we’re working with acquirers to help them um you know to to help prepare
24:20 indications on how they can incorporate this into their underwriting to help finance the purch purchase of of the
24:27 operating assets. Um, you know, we’re looking at the history of of the tenant in that building, what is housed in that
24:33 building. Um, what type of equipment, machinery, where the customers located, where the vendors located, what’s their
24:40 proximity to, you know, to the headquarters here, the the property in question. And you know all of those
24:48 variables um you know play uh a critical role in uh you know scoring how much
24:54 rent we can actually spread across that plant because it’s you know it’s a
25:01 balancing act because what we don’t want to do is make a recommendation on on
25:06 rent um that is going to choke the the business because then that’s a lose-lose
25:11 for the landlord and uh and the operator of that company. Um, so, you know, we
25:17 want to make sure that we find a responsible and and palatable rent that is is accretive enough um, you know, for
25:25 it to to achieve the proceeds that we’re looking for relative to the owner’s expectations on on what they think, you
25:32 know, the property might be worth to make that 2 plus two equal six. Yeah, exactly. And to sum it up really,
25:38 I mean, you know, you’re you’re evaluating the creditworthiness of the tenant, right? And creditworthiness
25:43 means ability to pay and free cash flow and all the above, right? And for those that are buying real estate, just like
25:48 whenever you get a loan, they’re typically looking at, you know, how much free cash is there to pay the loan and
25:54 how much buffer there is, right? That’s what DSCR, debt service coverage ratio. And they want to see a 1.2 on the DSCR.
26:00 Well, similarly, in this scenario, you’re not taking out a loan, you’re paying rent, right? the the lease wants
26:08 to make sure the lease can pay their rent. And if the business slows down a
26:14 little bit, they still have enough buffer to pay the rent. And so you’re, you know, there’s only a certain amount of rent that any business can absorb,
26:21 right? It’s not like you can make an infinite rent. And so it’s really evaluating that to get to the right
26:26 amount of valuation on the real estate, you know, because it’s all tied, right? The the rent is tied to the value of the
26:31 real estate, which is tied to how much cash out you can take out. And so for anyone looking to do this strategy, you have to really weigh those. And that’s
26:37 where you pull in a Brian, right? And you work with a Brian and say, “Hey, here’s what it looks like. Can you
26:43 please educate me on what you think rents can be achieved?” And Brian, you’re going to turn around and look at, okay, what’s the real estate? Well,
26:48 let’s talk about the business because that’s actually very much part of the equation to get to a number that makes
26:54 sense. And then as a buyer, you can figure out, is this something you can economically live with, right? You’re increasing rents, which increases your
27:01 cost, but you’re getting cash. How do you weigh those two things? Yeah. And I’ll even add one of the other things that that that adds to what
27:07 you’re saying, Ferris, is that it also doesn’t count against when you go to a lender and and they look at it as a lean
27:13 or another covenant, right? It might count against debt service, but it’s not it’s not going to affect your ability to
27:18 borrow more money in the future. Um because it doesn’t have any it doesn’t have that kind of like I took a second
27:24 loan to get 500 grand. Well, I sell lease back. It just increases my rent, but I can still go get that 500,000 if I
27:31 need it. Yeah. No, it’s uh to I like Casey, I
27:36 like the the question that you have. You know, how does this impact uh my relationship with the lenders and and
27:43 the finance ability of of the operating assets if you know, we’re not including the property as as part of that that
27:49 collateral pool. Um, you know, and the reason, um, you know, an an acquirer of
27:55 a company may look to to utilize the sale lease back over, um, you know,
27:60 having that sit in the collateral pool from an SBA lender or more traditional lender is because often, you know, the
28:08 the way a bank uh, underwrites the value of a property, it’s based on its
28:13 appraised or or insurance value. So an appraisal will go out um study the subm
28:18 market assess you know where similar you know office retail industrial whatever the subject category is are trading on a
28:26 price per foot in in that subm market and you know what they’re not going to do is is really study u the performance
28:33 of the tenant um you know how long they’ve been in the building how much rent they they can actually uh support.
28:40 Um, so you know when uh a lender you know extends financing and has the real
28:46 estate in in the collateral package it’s it’s based on an appraised value and not a sale lease back value. So you know I
28:53 would say the general experience um that we’ve had in the marketplace is that
28:59 there’s a variance of one and a half to 3x between appraised value and uh and
29:05 lease back value. And you know why the lease back investors are are prepared to
29:11 pay a higher price is because of the income that’s being sold uh you know
29:17 with the building. At the end of the day you know what a what a sale lease back is it’s bonded real estate. It’s it’s a
29:24 fixed income uh vehicle. It’s depreciable uh private credit if you will. Um so the you know relative to
29:34 extending uh you know a a loan uh to to an operating company like this uh owning
29:40 their real estate you know you you have the ability to depreciate that asset um
29:46 and uh you know you have a collateral interest in in the building. Um but you are also unsecured in the operating
29:53 assets. Um, so you know the the sale lease back tool really sits between
29:59 senior debt and u mezanine debt. I love it. So what happens at the end of the lease? So we get to the end of 20
30:06 years. Do you have the option to buy it back? Does it how does that how does that term
30:12 usually roll out? I hope the acquirer that we’re supporting is is not there in 20 years
30:17 and it’s someone else’s problem to to figure out, right? Because if they’re holding this for 20 years, they didn’t
30:23 uh execute on their investment thesis. The goal is to, you know, build the business, grow that that cash flow
30:31 stream, and then exit for for more. Um, no, but all but all kidding aside, um,
30:36 usually at the end of the lease term and, uh, you know, the end of the the base lease term, so if the initial is 10
30:43 years or 15 years, um, structurally into the lease, there’s usually extension options built in. uh in the form of like
30:51 four or five year renewal options or sometimes we see three 10-year renewal options and uh you know that’s
30:58 unilateral in favor of the tenant so the tenant can evaluate hey do you know I want to continue occupying this space
31:07 and uh it’s usually at a fixed rate you know based on the increased structure that was agreed to over the base term um
31:14 you know which can be valuable maybe not valuable it depends how the the subm
31:20 market rent grew over the life of of that lease. Um, but there’s usually, you
31:25 know, not a structural buyback uh option at the end of the the lease term. Um,
31:31 because of the some of the complications that can create with with the the lease accounting.
31:37 Got it. And this last question because that’s actually something we were wondering in a sell lease back. Is it hard to
31:45 negotiate for the business, right? The buyer to basically say, “Hey, you know, at any point in time, we have the right
31:51 to buy it at a, you know, five cap, something expensive to where it gives
31:57 the seller, you know, they’re not concerned like, hey, am I undervaluing my real estate?” But it gives the
32:03 potential next acquirer the comfort or the confidence knowing, hey, I could also buy the real estate because some
32:08 businesses are so deeply integral to the real estate. like you may not be able to get the environmental permissions that
32:14 you got the first time around, right? Things like that. And so is there a way to structure it to help mitigate that
32:19 risk for the next buyer? Yeah. Um so I would say, you know, you
32:26 certainly have to pay for that purchase optionality like to your point um at a much more compressed cap rate than
32:32 uh the original SE back uh investor acquired at. Um, you know, but having
32:39 that uh purchase option in in the lease, like I said earlier, can can create um,
32:45 you know, accounting issues and tax issues for both the landlord and and the
32:51 tenant. Um, that everyone, you know, should consult a tax advisor.
32:56 Yeah. What you’re saying is it looks it’s becomes a finance lease. And so now it almost might not might have to be
33:02 advertised and and and looked differently. So now it could go against your debt covenances and all the
33:07 advantages that you’re getting from the lease. Yes. The goal often is to structure the lease as an operating lease and by
33:13 including that purchase option. There’s a case to be made that it’s it’s more of
33:18 a finance or or capital lease. Um I could, you know, we could do a whole
33:24 podcast segment on that and it’d probably be super boring and and granular. Um, so you know I but general
33:32 rule of thumb like you know if these landlords that are providing this sale
33:37 lease back capital um you know to answer Ferris’s question like they’re because
33:43 they’re signing up for this long-term lease they have a vested interest in you
33:48 know seeing the um their the net worth of uh that tenant grow. So, you know, if
33:58 the original uh acquirer of that business is getting ready to exit and they’re going to exit to,
34:05 you know, a uh a larger uh you know, let’s say strategic or private equity
34:10 sponsor with an existing platform in that space. um you know, they’re going to realize a credit enhancement. And
34:17 that’s, you know, in uh in the landlord’s best interest because if they invested at, you know, a 7 and a half,
34:24 eight and a half% cap rate and then someone’s going to come in and, you know, buy the real estate at a five on
34:30 the then rent um or assign that lease with, you know, a higher net worth uh
34:36 lease guarantor tenant. U that’s going to improve the value of of that landlord’s property. Got it.
34:43 All right, cool. Huge, man. This is good stuff, Brian. Yeah, thank you for spending some time with us here. Let’s jump into some of
34:49 the other meat of the the I completely agree. I mean, at least back valuable piece of information, but for now, we can hop on to our rockaround
34:56 where we ask our guests the same three questions. First question, what do you like to do your free time?
35:02 So I grew up um playing hockey uh lacrosse and uh as a result of you know
35:09 playing those those sports where you know requires a lot of conditioning uh you know strength training and uh
35:16 endurance training has always been a big part of uh my fitness uh routine. So um
35:22 I like to to compete in uh in races. So, not, you know, running marathons, uh,
35:28 where you’re you’re, you know, uh, aimlessly running, uh, for 26 miles. I
35:34 think that gets pretty boring. Um, but dynamic races, like I competed in a in a high rocks competition in, uh, in New
35:41 York, uh, June 24 and then 25, which is basically uh, thousand meter runs uh,
35:48 eight times. And in between each thousand meter run, you’re doing some form of a dynamic uh or functional
35:56 exercise. Skier machine, rowing machine, farmer’s carry. Cool. Walking lunges, wall ball, uh squats.
36:03 So, I like uh like getting out there to uh to compete. And what was that race called? What was it
36:09 called? Hy Rocks. It’s a European race. My uncle uh introduced me to it
36:14 uh at the end of 23. And uh you know I was looking for for something to do
36:20 other than compete for sale lease back business. He he put this on my radar and you know
36:26 Michael Solommani and I one of the other partners at SAB competed together in 24
36:32 and then uh Pit Sabberal and I uh competed together in uh 2025.
36:39 That’s awesome man. All right next question. What’s your most memorable moment in your business journey?
36:44 most memorable uh moment in my business journey uh really goes way back to uh
36:51 you know probably 2008 n I’d gotten a snowblower for Christmas
36:57 uh from uh from my grandfather. he uh you know really introduced me to to
37:02 power tools and um my brother and I started this this snow removal company
37:08 Huber Snow Removal and um you know we had a neighbor that uh you know wasn’t
37:15 really valuing the the service um that uh you know we we had you know performed
37:22 timely and you know thought we were we were overcharging and uh you know
37:28 thought you know do something neighborly like, you know, we’re not going to pay you for this, but you know, we we had to
37:34 have a hard conversation and communicate to them, no, like that this is a business for us. This is, you know, how
37:40 I’m uh you know, paying for gas money for for the you know, car that I’m going to get when I’m 17. So, um, you know,
37:48 have having that that hard conversation and and you know, being able to professionally articulate,
37:54 um, that, hey, you know, people are giving me a commitment to basically clear the snow in in their driveways
38:01 and, you know, I I can’t prioritize service to you if if you’re not prepared
38:06 to uh, you know, to pay us. So, you know, my dad at that point, you know,
38:11 the the thing that sticks out is um you know, don’t be afraid to to ask uh for
38:17 what you’re worth. Love it. Good stuff. All right. And the last question, favorite tool or resource.
38:24 Uh a mechanical pencil and uh and a calendar. Uh it’s something I’ve done
38:30 for 15 years now since I was a a freshman in college at at University of Delaware. I
38:37 sit down every Sunday night and just road mapap uh my week and you know that
38:43 uh pen and you know pen and paper, pencil and paper uh specifically pencil because you know writing that down
38:50 creates intention and you know provides you with uh the clarity to prioritize
38:57 and and deprioritize the three or four activities that we’re responsible for and the tasks that need to get completed
39:04 on on said week. But you know things have a tendency to change all the time.
39:10 Um so that’s why I say pencil because you know have having that road map provides the visibility and clarity but
39:16 often you know you have to erase reerase and and move things around. Um but uh
39:22 very old school um you know approach to to organization but it’s it’s something you know that’s
39:30 uh that’s worked for me a long time and uh you know creates the the consistency that you know I need to uh to perform.
39:37 It’s huge man. I’m I’m similar man. I got a calendar got a pen. I don’t have a pencil but sometimes just whatever’s on
39:43 the desk but I I too I like to road map. I like to draw it out. Look at it at the end of the week man. It helps me out so
39:48 much. my son when he went to college, you know, it was the same thing I told him. I was like, you got to map it. You
39:53 got to have a plan. You got to know what you’re going to do every week. And hopefully he’s doing what he says. So, we we’ll see. But Brian, man, just
40:00 really really awesome to hang out with you today and learn more about Sissback and about SAB. Um, if our listeners want
40:07 to get a hold of you, how’s the best way to contact you? Yes. So, um, you know, my my full name
40:13 is actually uh John Brian Yuber. My dad is is also John Yuber. So my entire life
40:19 I’ve uh I’ve gone by uh Brian just to avoid confusion around the household uh
40:25 growing up. And um you know that’s that’s me on LinkedIn, John Brian Yuber.
40:31 And uh you know you can refer to me and and reach out to me and address me as as
40:36 Brian. My email is is b yuber sapcap uh.com and we’ll put in the show notes for the
40:42 listeners. Awesome. Well, Brian, thank you very much for educating our listeners on this lease pack.
40:48 Yeah, thanks for the opportunity and uh awesome to to spend some time with both of you and look forward to uh to getting
40:54 together in uh Chicago here in the next couple weeks. Absolutely. Looking forward to it. Thanks, Brian.
41:00 Thank you for listening to the M&A Launchpad podcast. If you’ve enjoyed today’s podcast and would like to support us, please leave us a rating and
41:07 review after you listen. I’m Casey Mchu and I look forward to talking with you next week. [Music]
