HOLDco

A sale-leaseback can look like a clean liquidity win — until you run the full math. This episode breaks down what owners actually pocket after closing costs, depreciation recapture, capital gains taxes, and two decades of escalating rent.

Show Notes

A sale-leaseback headline number can feel transformative — until closing costs, tax recapture, and a twenty-year rent obligation reshape the picture entirely. This episode of HOLD.co walks through the complete net-proceeds model that every owner should build before signing, drawing on the sale-leaseback net proceeds after-tax analysis published on the Hold.co blog. The math is more consequential than most sellers expect, and the gap between gross price and real economic value is the whole story.

The episode covers the full value stack of a sale-leaseback transaction, from pricing through long-term lease obligations:

  • Cap-rate pricing mechanics: How net-lease investors set valuations by asset class — with Q1 2026 benchmarks ranging from roughly 6.8% overall to above 7% for industrial — and why a sale-leaseback can unlock 100% of fair market value versus the ~70% LTV a lender offers.
  • Transaction cost drag: Broker commissions, legal, title, and environmental work typically consume around 2% of gross proceeds before a dollar of tax is calculated.
  • The outsized tax bite: Depreciation recapture under Section 1250 is taxed at up to 25% federal — often higher than an owner's assumed capital gains rate — and layering in state income tax can push the combined tax liability to roughly 20 cents on every gross dollar received.
  • Twenty years of compounding rent: A $700K annual lease with a 2% fixed escalator over a 20-year primary term produces total rent payments that substantially exceed the original gross sale price, making the leaseback function more like long-dated financing than a clean asset monetization.
  • Balance-sheet and covenant risk: Under ASC 842, lease obligations appear as right-of-use liabilities — meaning lenders, rating agencies, and acquirers all adjust for the obligation the same way they would funded debt, with real implications for leverage covenants and credit capacity.
  • The EBITDA and enterprise-value haircut: Rent becomes a recurring P&L expense that reduces reported EBITDA, which in turn compresses what a future buyer will pay for the operating business — an offset that can erode a meaningful portion of the after-tax real estate gain.

For owners who want to stress-test rent coverage over a full business cycle, or who are weighing a sale-leaseback as part of a broader capital event, Hold.co's real estate advisory and investing practice and mergers and acquisitions advisory services provide hands-on transaction support. Also worth a listen: Add AI to Your ERP or Replace It? A Portfolio Operator's Framework, which covers a different capital-allocation decision facing operators today.

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What is HOLDco?

An operator-led view of holding company work: acquiring, building and running durable, cash-producing businesses in the real economy. Deal criteria, diligence, integration, capital allocation, and the management questions that arrive the day after a close.

Each episode takes one decision — what to pay, what to fix first, when to keep the seller and when not to, how to fund the next deal — and reasons it through from an operator's chair rather than a spreadsheet. Written for people buying and running businesses, not spectating on them. Five or six minutes an episode.

Topics include deal criteria and screening, diligence that finds the real risk, deal structure and seller financing, integration priorities after close, capital allocation, management transitions, and running several businesses at once.

Produced by HOLD.co, an operator-led holding company. Full details, services and further reading at https://hold.co