The role of sale leasebacks in modern dealership capital strategy

Rising real estate costs, shifting market dynamics and tightening margins are reshaping how dealership groups think about capital, growth and long-term strategy. In recent years, the buy-sell market has seen transaction prices climb steadily, driven by elevated blue sky multiples, larger multi-store packages and increasingly expensive dealership facilities. As a result, even well-capitalized groups are reassessing how they deploy cash and how they can unlock liquidity without compromising operational control.

One approach gaining traction across North America is the strategic use of sale leasebacks. While not new, sale leasebacks have evolved into a sophisticated capital solution aligned with the needs of modern dealership groups, particularly those looking to expand, recapitalize or strengthen their balance sheets.

On this month’s episode of Up to Speed, Mike Mader, Principal with Baker Tilly’s dealership advisory services team, is joined by Ned Hennessey, Vice President of Dealership Investments at Surmount, to discuss why dealers should explore sale leasebacks as an option to combat increasing costs of real estate, construction and acquisitions, and use these transactions as a strategic tool for funding growth, strengthening balance sheets and managing large M&A opportunities in an increasingly competitive market.

The pressure points: Why capital is tightening

Dealers today face a convergence of financial pressures. Real estate values have reached historic highs, and construction costs continue to rise due to manufacturer image programs, facility upgrades and market expansion. At the same time, dealership profitability has normalized from the extraordinary highs of the COVID era. Cash reserves that once felt abundant are now being deployed more cautiously.