A second transaction inside the first
Many founders own the building the business runs from, often through a separate company. It made sense at the time: rent paid to yourself instead of a landlord, and an asset that could grow in value alongside the business.
When it is time to sell, that arrangement turns one transaction into two. There is the operating business, and there is the property it sits on. They can be sold together, separately, or not at the same time at all, and each choice changes what a buyer sees and what the founder keeps.
Treating the property as its own transaction, and early, keeps it from complicating the one that matters most.
Why buyers prefer to lease
Many buyers of an operating business want to buy the business, not the building. There are good reasons for that. A buyer pays a multiple of earnings for the operating company, and capital tied up in property earns a different kind of return. A private equity buyer's plan is built on the business's cash flow, not on real estate. A strategic buyer may already have facilities, or may want the freedom to move. And the lenders who finance the purchase of a business often look at property differently from the way they look at operations.
None of this means a buyer will refuse to buy the property. Some will want it. But a founder should expect the conversation to start with a lease, and be ready for it.
How a sale-leaseback works
There are two common ways to separate the property from the business at a sale.
In the first, the founder keeps the property. The operating business is sold, and the new owner signs a lease with the founder's property company. The founder still owns the building and collects rent from the buyer.
In the second, a sale-leaseback, the property is sold to a separate investor, and the business, under its new owner, leases it back. The founder sells two assets to two different buyers, often at around the same time.
Either way, the lease becomes one of the terms of the deal. Its length, its rent, who pays for maintenance and repairs, and whether the tenant can renew or leave are all negotiated. A buyer wants enough security to run the business. The founder, as landlord or as seller of the property, wants a tenant whose rent supports the property's value. Your attorney drafts the lease. Its business terms are part of the sale.
Market rent and adjusted EBITDA
The rent the business pays today matters more than most founders expect, because it runs straight through adjusted EBITDA.
When the founder owns the property, the business often pays whatever rent was convenient: sometimes below what a landlord would charge, sometimes above it. A buyer will adjust earnings to a market rent either way, because after the sale the business will pay market rent to someone. The playbook's adjusted EBITDA bridge includes exactly this line: rent below market on a related-party lease, taken off adjusted EBITDA as a negative adjustment of $80,000 in its illustrative example.
Because buyers price a multiple of adjusted EBITDA, every dollar of rent adjustment is multiplied in the price. Below-market rent lowers adjusted EBITDA, and the headline with it. Above-market rent can be added back, but only down to market, and only with evidence of what market is.
The practical answer is to set the rent at market well before a sale, supported by an independent view of what market rent is, and to put the lease in writing. Then the earnings a buyer sees are the earnings it will actually get, and there is no adjustment left to argue about.
The rest of the lease matters too. A buyer will read its length, its renewal options, and any clause that lets the landlord end it if the business changes hands. A short lease from a related party, or one that can end on a sale, is a risk to the buyer's plan, and the buyer will want it settled before closing. A lease written at market, for a sensible term, removes the question before it is asked.
Selling the property separately
Some founders decide to sell the property on its own, either at the same time as the business or later.
Selling at the same time gives a clean break: two transactions, one closing season, and no continuing tie to the business. Keeping the property and selling it later gives the founder rental income and time to choose when to sell. The cost is remaining a landlord, with a tenant whose fortunes now depend on someone else's management, and a building whose value depends on that tenant.
If the property is sold to an outside investor at the same time, the two negotiations are linked. The investor will price the building on the lease the business signs, so a higher rent can help the property's price while it lowers the business's adjusted EBITDA, and a lower rent does the reverse. Seeing both sides at once is how a founder finds the balance that leaves the most in total.
There is no general right answer. The choice depends on what the founder needs from the sale, how they feel about owning property for longer, and what the buyer of the business wants. What matters is that the decision is made deliberately, before buyers start asking, rather than improvised in the middle of a negotiation.
The tax angle
The tax consequences of selling a business, selling a building, and the order and structure of the two depend on how each is owned and on your own situation. This article does not cover them. Talk to your CPA and tax attorney early, before the structure is set.
The operating side is part of preparing the sale: the rent, the lease, and the adjusted EBITDA a buyer will accept. The tax side belongs with your own advisors, and the two plans work best when they are made together, so the plan for the property fits the plan for the business.