Sizing up a single-tenant industrial sale-leaseback
You are underwriting two things at once: the building, and the business that occupies it. Here is the order we work in.
A single-tenant industrial deal looks simple on the surface. One building, one tenant, one lease. The work is in judging whether the rent holds up for the full term, because that rent is the whole return until the day you sell.
Start with rent coverage
Before the building, look at what the business earns against what it pays. A rent the operator can cover comfortably through a slow year is worth more than a higher rent that only works at peak. Sale-leasebacks are typically priced around an 8% cap rate, roughly 12.5x annual rent, so a small change in sustainable rent moves value more than most buyers expect.
Then look at the building on its own
Ask what the property is worth if the tenant leaves. Clear height, power, loading, and drive time to the nearest interstate decide how quickly you re-tenant. A building that suits one operator and no one else is a different risk from a building that fits half the market, even when the two carry the same rent today.
Where the lease does the work
Terms of 15 years or more, with renewal options, are what turn an operating business into a fixed-income profile. Triple net structure keeps taxes, insurance, and maintenance with the tenant. Built-in escalations decide whether your yield keeps pace with costs or quietly erodes over the hold.
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