Valuing a Sale Leaseback C-Store/Gas Station

When looking at a sale-leaseback for a gas station/convenience store, what is the purchase price based on?

By Jonathan Hipp | Updated on April 02, 2014

When looking at a sale-leaseback for a gas station/convenience store, what is the purchase price based on? Is it the value of the business as a going concern, or, since the purchaser wouldn’t actually get the benefit from the business until the end of the lease, is it the value of the real estate alone?

The answer is it’s likely a combination of both, but in the case of a sale-leaseback the most critical factor in determining the value is what the rent will be post closing. What drives the rent is fundamentally the performance of the underlying business and how much it can realistically afford to pay. For example, let’s say that for a gas station the rent/sales ratio shouldn’t be more than 7% (i.e. rent should be no more than 7% of gross sales).

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