Leveraging a Tenant Purchase Option with a Simultaneous Sale Leaseback & Generating 7-Figure Cash-Out

The Assignment

Matthews™ client, a private equity group focused on acquiring North American industrial companies, recently acquired an Indiana-based light manufacturing and distribution company. The client had a tenant purchase option with the former owner to also acquire the company’s underlying real estate post-M&A, a mission-critical industrial facility. The agents advised the client to leverage their tenant purchase option in conjunction with a simultaneous sale leaseback in order to create instant liquidity, while also finding a long-term real estate partner.

 

The Process

Given the sensitivities of a two-step “double escrow” transaction, Matthews™ agents ran a fully off-market process to identify the right real estate partner.  They engaged a wide spectrum of investors, including qualified private investors, regional family offices, private equity, and institutional groups. Within 21 days of launching the agent’s marketing campaign, they secured multiple LOI’s from interested parties.

 

The Results

Through a tailored off-market approach, agents were able to identify an optimal real estate partner, while also achieving an observable 1.5x arbitrage on the real estate. Upon closing, they produced a 7-figure cash-out, providing the client with an injection of working capital that will be used to pay down debt, reinvest in operational efficiencies, and fund future acquisitions. The deal was executed on an all-cash basis, with a limited due diligence period all within a 34-day closing window. The Matthews™ agent’s approach and strategy not only met the client’s objective of completing this complex transaction, but it also provided instant cash that will be reinvested into the business, while allowing the company to maintain full control and uninterrupted operations in the facility.