What is a Sale-Leaseback Transaction?
A fitness company or individual sells the property it both owns and occupies, then leases back from the new owners, in order to maintain current operations. This is usually an advantageous, long-term deal for both parties. By selling the property, the fitness company is able to use the money from the sale transaction to build on its current operations or invest in other ventures.
What Are You Looking For?
Our team specializes in fitness real estate that already has an established fitness-related business operating inside the property. We want to hear your story and why we should consider owning your property. What makes you stand out from other owners, what makes your fitness business unique?
What are the Criteria?
- Total club value of $1million to $20+ million
- Single clubs or portfolios of clubs
- Existing clubs or build-to-suits; proceeds can also be advanced for building renovations
- Most fitness real estate is in our wheelhouse
- Minimum leaseback of 10-15 years, depending on property type and location, plus renewal options
- Located in the U.S.
What Other Specifics Should I Consider?
- Sale leaseback real estate is typically valued at 100% market value as determined by an independent appraiser.
- We will require a lease term of at least 10 years. A 15-year lease is preferred for companies with poorer credit or for real estate in secondary markets. Renewal options of 20+ years, in 5-year terms, are common.
- Leases are structured as absolute triple-net leases, which means that the fitness club owner retains complete operational control of the property and is responsible for all building repairs and maintenance, insurance, real estate taxes, etc. The only contact with us is for payment of the rent. (We understand the health club business, so if you ask us for help, we will have the answer.)
- In the current market, initial cap rates (the ratio of the lease payments to the transaction value) for investment grade credits and seasoned operators are usually 7-8% or better, BB credits are typically in the 8.5-9.5% range, and B and below credits often fall between 10-12%.
- In addition to the fitness club’s credit, the location, quality and age of the fitness real estate, as well as the term of the lease, will also affect the pricing. Our biggest factor is you, the operator. We are looking for club owners that love what they do, are passionate about fitness and are looking to continue running the day to day operations of their club or clubs.
- We give some buyers the ability to offer a repurchase option at the end of the lease term or, in rare occasions, at specified times during the lease.
- The repurchase option could be based on future fair market value or at a specified price.
- We can typically close a transaction within two months of an agreement on the letter of intent. Closing can often be accelerated to meet your requirements.
Contact us to discuss your deal as each club is unique and we want to get to know you and your story.
We invest in people, your success is our success.