Ratchet+Wrench Radio May 27, 2026

Unlocking Hidden Equity: How Shop Owners Can Turn Real Estate into Growth Capital

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19:44

Company

Endeavor Business Media

This is the company that produces the podcast episode. Think of it as the podcast’s publisher.

Company

Endeavor B2B

This is the larger company behind the podcast publisher. It’s basically the business-focused parent organization.

Company

Century Partners Real Estate

This is the real-estate company Matt Kramer works for. They advise business owners on strategies involving the property their business operates from.

Person

Matt Kramer

Matt Kramer is the real-estate professional on the show. He helps auto shop owners figure out how to use the value in their property to fund expansion.

Concept

unlock the equity tied up in their real estate

Equity is the value you effectively own in your building. “Unlocking it” means turning that value into money you can use for things like growing your shop.

Concept

sale leasebacks

A sale leaseback means you sell your building to get cash, then rent it back so you can keep using it. It’s a way to turn property value into money for growth.

Concept

portfolio strategies

Portfolio strategies mean looking at several properties together instead of one at a time. That can change how you raise money or plan growth across locations.

Term

EBITDA

EBITDA is a way to measure how much profit a business is generating from its operations. The podcast says business sales are often priced based on a multiple of that number.

Term

cap rate

Cap rate is a real-estate way to estimate how much income a property produces compared to what it costs. It helps investors compare property values using the rent.

LIVE

Welcome to Ratchet and Wrench Radio, produced by Endeavor Business Media, a division of Endeavor B2B, bringing you strategies and inspiration for auto care success.

For many independent shop owners, the building is simply where the work gets done.

But according to Matt Kramer, managing partner of Century Partners Real Estate, that mindset could be leaving serious money and opportunity on the table.

In this episode of Ratchet and Wrench Radio, Kramer breaks down how automotive service operators can unlock the equity tied up in their real estate and redeploy it to accelerate growth.

From understanding valuation differences between your business and your property to exploring sale leasebacks and portfolio strategies, this conversation offers a fresh perspective on scaling beyond traditional financing.

Let's listen in.

Hi Matt, thanks so much for joining us.

Hey Christine, thanks for having me on.

You are welcome. Matt Kramer, managing partner of Century Partners Real Estate.

Matt works with multi-locational automotive service operators to develop real estate strategies that unlock capital and support expansion without relying solely on traditional debt.

So Matt, how did you first get involved in working with automotive service businesses?

First guest started just generally working with operators of single tenant retail buildings.

That's really our niche. That's our specialty. We don't do hotels. apartments. Certainly don't do houses.

We work with business owners that occupy their unreal estate.

And auto service is one that we're extremely bullish on and have done a lot in the fast food quick service restaurant space, the drive through coffee space, car washes, early education, you name it.

We've had a particular focus on the auto service industry in the past five years. Again, just a bull thesis.

On the industry as a whole, we think it's one that's extremely durable. It's not going to get Amazonized, so to speak.

And we find that investors generally feel the same way.

Now, a lot of auto shop owners would say that their building is just where the work gets done. It's just the place.

Why do you believe the real estate itself is often one of the most underutilized assets in the business?

Well, the valuation of the real estate is generally going to be higher than the valuation of the business.

And just to try to give an example, if you're looking to sell your business, it's going to be based off of a multiple of the EBITDA that could be four to eight times, maybe higher, maybe lower, depending on how many locations you have.

But when we look at it on a cap rate basis and try to translate it into a multiple, the valuation on the real estate, which is based off of the rent that the tenant's paying, is going to be generally somewhere between 13 and 20 times.

So there's a lot of equity in these buildings that I think in the auto service industry in particular they might not be aware of or they can access that as fuel for growth.

Now let's talk about some of these options. Can you share a little bit about possible options that owners would have?

Yeah, there's a couple. So the basic one would be the sale lease back where an owner, an occupier, an operator owns their real estate.

Rather than getting bank debt or doing a refinance, what they would do is a sale lease back. So sell the property to an investor and sign a long term lease and lease it back to themselves.

They mean full operational control over the building. Usually the leases are 10 to 20 years with four or five year options.

So you could have up to 40 years of control of the building and then ultimately take the capital that you'd get the proceeds from the sale and deploy it into more efficient buckets.

So that might be an M&A transaction. You're buying out a competitor or a colleague or a business partner. It's paying down more expensive debt.

It's building more stores. There are a lot of options when we're talking about what's the best home for the money.

And what would you say would be the key benefits of a sale lease back?

I mean, ultimately, I guess just to back up, the first question that we would ask an operator is where are you today and where do you see yourself in 13 and five years?

The sale lease back works great for a lot of groups and maybe it doesn't for others. For example, if you're a one or two unit operator and you have plans to grow at a unit every two or three years,

a sale lease back might not be the right option for you. But if you're a two unit operator and you have aspirations to get to 20 or you're a 50 unit operator and you have aspirations to get to 100,

it is one of the most accretive ways to grow is to, quote unquote, buy, build, sell. Just keep that capital recycling and moved on to the next project.

So hopefully you're freeing up cash. The liquidity would be what you're after in a situation like this?

Yeah, absolutely. It's generating liquidity oftentimes at rates that are lower than bank rates, but also when we're talking about loan to value,

you might max out at 80% from a bank and that's loan to appraise value. With a sale lease back, you're going to be at 100% of the market value of the asset.

So those extra proceeds really can go a long way.

Now you mentioned when it might be a wrong move, such as scaling, people who are trying to scale quicker perhaps, is there any other situations where a sale lease back might not be practical?

Yeah, there are a few. One would be if you don't have a plan. I would never advise someone to do a sale lease back and not have some sort of house for the money.

Unless you've got a massive empire, I wouldn't do a sale lease back to go and buy a boat, but it really depends.

The other thing is in setting and structuring the sale lease back, we'd want to stay away from the allure of increasing the rents to generate additional proceeds,

meaning that you'd get a nice paycheck on the closing date, but then you're going to have to pay rent for the duration of the lease.

We just don't want to see operators bite off more than they can chew. If there's ever downturn, road construction, whatever's going on,

we just want to make sure that the rent that they set from the onset is going to be sustainable for the long term.

So if this is something that a shop owner was considering, what questions should they be asking upfront at the onset? What would you recommend?

Yeah, typically we would start with a portfolio analysis. So take a look at the business, take a look at the real estate, figure out what are the trends,

and ultimately get to a rent that they feel like they can live with for the next, again, it could be up to 40 years.

And then from there, put evaluation on it, say, you bought this property for X, it's not worth X plus, whatever.

And then decide if it makes sense timing wise to do the transaction to put the money into other projects or, again, pay off more expensive debt.

What makes one auto repair property more attractive to investors than another?

That's a good question. I mean, somewhat hard to answer because beauty is in the eye of the beholder for the investor.

So it could be geographic, the credit of the tenant, right?

Are you a five unit operator versus a corporately guaranteed 500 unit operator?

Your cap rate, your rate of return is going to change depending on, you know, the credit of the tenant and the geography, the lease term, the age of the building,

your general real estate fundamentals, right? Are you on a signalized corner? Are you an out parcel pet to a grocery store?

You know, there's a lot that goes into it. So good question, tough to answer.

It's going to depend on the individual investor who's going to be buying it.

A lot of variables there.

Yeah, yeah, definitely, right. I don't know if this makes sense, but, you know, one man's trash is another man's treasure.

Some people might be looking for, you know, a whatever, maybe it's like a corporately guaranteed Mavis.

This is an absolute coupon clipper and, you know, maybe a little bit of a lower cap rate and others might be more interested in a higher cap rate on a five unit operator

where they can actually have a relationship with their tenant, pick up the phone, hash out any problems.

You know, a lot easier to do business with a smaller group versus the larger entity.

So you've got your strengths and challenges in each scenario.

So what does the process look like when you actually sit down with an auto shop owner and they're considering this option?

How do you walk them through this and what can they expect?

Yeah, you know, again, it would go back to putting together an analysis of the portfolio as it stands.

Again, going back to one year, 135 year goals, ultimately getting to a rent and valuation and seeing if it's something that makes sense.

And then from there, there are a couple options.

You've got your retail quote unquote buyers, what we would call mom and pops.

It could be, you know, oftentimes you hear that the doctors and lawyers of the world, the 1031 exchange buyers is typically the buyer or it could be an institutional group.

The retail buyer typically is going to pay a lower cap rate and you'll get more proceeds.

The challenge there is these are generally one-off transactions that are going to take longer.

You know, your figure, it's going to be, you know, maybe 180 days from start to finish.

If you have five properties, you're going to have five different buyers, five different escrows, five different transactions, potentially five different leases.

So the question is, is the juice worth the squeeze?

Now, on the other hand, we've got groups that'll buy portfolios.

The strength there is one buyer, one transaction, five properties or however many.

The speed of the transaction is going to be much quicker.

It could be 30 to 45 day process, but the pricing is not going to be quite as strong.

So, you know, a lot of those questions are, do you have an immediate home for the money?

Does it make sense to get the deal done, reduce the headaches and move on?

Or, you know, do we want to run the full process and maximize proceeds?

There isn't necessarily a right answer.

It really just depends on, you know, the operator's current situation.

Can you share or walk us through an example of an auto repair shop owner who used this strategically to grow their business successfully?

There's an auto glass repair operator that when we met them, they had two units, maybe three units in Florida.

And we did sale these specs on two of their units, and then they rolled the proceeds into other projects.

We also partnered them, and this is something that we can touch on too, with a developer who bought vacant buildings,

gave them TI dollars and ultimately leased them the location so they could essentially get into a property for, you know, very little capital injected, if at all.

But sort of long story short, in, I think it was about 18 months, they scaled from two to 19 units without putting in a ton of their capital.

Wow, that's impressive.

Yeah, really good operator, has a great team around them.

And those are what they're doing, they're great at site selection.

Excuse me, they're great at site selection, they know their metrics.

And again, something that I like about the auto service space in a whole is the buildings are really fungible,

meaning that if there's a vacant auto shop in a market that you like, maybe it was a mom and pop operator that didn't really know what they're doing.

But if you have a, you know, bull thesis on your operations, whether it's auto glass or tires or oil chains or, you know, whatever it is,

we've got groups that'll come in, provide the capital for you to get into the location in exchange for a lease.

So, you know, again, it's a way to scale through real estate where you don't even necessarily have to put the capital in yourself.

I would describe that as a, you know, lower risk, lower reward in the sense that you could go and do it yourself and probably make a couple more bucks.

But one, you're going to be limited by the amount of capital that you have to put as down payments on the deals.

And then two, you're playing real estate developer and you could take market risk if the pricing doesn't shake out to where you need it to pencil.

You know, something that I like to talk about oftentimes with operators, especially between call it one and 20 units is just focusing on the core competencies, right?

Until you're large enough to have, you know, a chief development officer, you know, director of real estate, something like that.

I think the most important thing, similar to what we do at Century Partners and staying in our lane of single tenant retail operators is just focus on your operations,

deliver a great customer experience, increase the top line, increase the bottom line.

And then once you get to a certain critical mass, then we start talking about bringing all of the, you know, development expansion plans in-house.

So let's say that there's an owner involved in a sale lease back and like everybody else, they decide to eventually sell their business.

How does that affect the either the resale value or the attractiveness or, you know, the qualities of the shop when it comes time to sell?

Yeah, that's a good question. I see it a lot. I mean, just with the emergence of private equity into the space.

I mean, in pretty much every space out there across the board, my recommendation generally is don't sell the real estate with the business.

I would either sell it before or I would sell it after.

Interesting.

I think especially if you have a portfolio, any buyer is going to be looking for a portfolio discount.

What they're going to do is they're going to take the real estate, they're going to reset the rents and then they're going to do a sale lease back.

So I think that while the check size might be larger and it might be, you know, again, an easier transaction, my recommendation in that sense is generally keep the two entities separate.

If you can separate beforehand your business into a quote unquote op-co and the properties into a prop-co, that would be my recommendation.

Again, it's not a fit for everyone. Just like with the one-off versus portfolio example, maybe the check size is big enough where you just want to wash your hands and be done with it.

You've been in the business for 40 years and you got your number and you don't care.

But that's generally my advice to operators is separate the real estate out.

Great advice. You work with investors and operators across the country.

What trends are you seeing right now in the market and how it views automotive service real estate?

Yeah, good question. Trends market-wide. I mean, I think everyone's paying attention to the rate cuts that happened last year and leading into this year.

Questions about the new Fed share coming in and, you know, as we sit here at the end of March, all the external factors that are going on that they kind of affect interest rates as well as stock prices and whatnot.

So ultimately still very, very bullish on the single-time at triple net assets.

And generally they do better when things are turbulent because your stock could go up by 7%.

It could go down by 20%, seemingly at, you know, the send of a tweet these days.

But when an investor is buying a building, the rent amount is contracted and that rent amount is going to come in every month.

So, you know, again, these types of investments generally are very stable and do well in recessions.

And going back to in the auto service space in particular, again, I think the way the investors see it is, you know, they're durable, fungible, essential tenants.

And also something to point out is generally the basis on the deals, meaning just overall the purchase price, it's in a great bucket.

So it's called the, you know, one to 3000000 dollar bucket, which there are a lot of groups that, you know, can compile that amount of money to go and buy something.

Versus if you were trying to sell like a car wash or an early education deal, those are 5000000 dollars plus.

There's obviously more people with 2000000 bucks than 5000000 bucks.

So as a function of that, you've got more demand and ultimately more competitive rates and pricing.

What would you say is the biggest misconception out there right now about real estate in this industry for independent shop owners who are listening?

That's a good question.

I think the biggest misconception would be if you're going to get into a new property to buy land and build it.

Maybe it's not, but it's just with the cost of construction.

I'm having a tough time seeing these deals pencil across industries.

Again, that's why I'm so bullish on the space because you can take an existing building and make it into something that can be great for your business.

But to go and buy a piece of land and then build the building, it's just cost prohibitive.

It's just so darn expensive.

Both with the cost of the actual sticks and bricks, so to speak, the cost of the land and then obviously the construction blending rates are a totally different animal.

Better now than they were a few years ago.

But still, I'm not really seeing how some of these deals are penciling.

If shop owners want to get in touch with you or learn more, where can they find you?

CenturyPartnersRE.com is our website.

My email address is first initial, last name.

M Cramer at CenturyPartnersRE.com.

Ladies and gentlemen, Matt Cramer, thank you so much for joining us today. Matt, we enjoyed having you as a guest.

Yeah, thanks for having me on. It was a pleasure.

You are welcome.

That's going to do it for us today at Ratchet and Wrench Radio.

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Thanks for listening and may the rest of today be the greatest day of your life.

0:00

19:44

Unlocking Hidden Equity: How Shop Owners Can Turn Real Estate into Growth Capital

Endeavor Business Media

Endeavor B2B

Century Partners Real Estate

Matt Kramer

unlock the equity tied up in their real estate

sale leasebacks

portfolio strategies

EBITDA

cap rate

About this episode

Original notes