How Private Equity Firms Use Real Estate Strategy to Create Value

Private equity has always been a game of value creation. But the conditions that made that game relatively forgiving for a decade—declining rates, expanding multiples, abundant leverage, and short hold periods—have changed. According to McKinsey’s 2026 Global Private Markets Report, more than 16,000 companies globally are now held for four years or longer, representing 52% of total buyout-backed inventory. The average hold period has stretched to 6.6 years. An estimated $1 trillion in unrealized assets sat on balance sheets at mid-year 2025. Exit pressure is real, and the playbook that generated returns in 2019 is not the same one that will generate them in 2026.

Against that backdrop, the firms that are creating durable operational value in their portfolio companies are distinguishing themselves from those waiting for market conditions to do the work. And increasingly, one of the most underutilized value creation levers in the private equity toolkit is a comprehensive real estate strategy.

We aren’t talking real estate private equity: the strategy of buying and managing properties as an asset class. What we are talking about is the deliberate deployment of location strategy, lease portfolio management, sale-leaseback transactions, and operational footprint planning as tools to drive EBITDA improvement, unlock capital, reduce cost structures, and accelerate growth in operating companies. Done well, real estate strategy can move the needle materially on the metrics that determine exit multiples.

Site Selection Group works with private equity firms and their portfolio companies across five distinct real estate strategy engagements that consistently generate measurable value. This blog describes each one.

1. Scalable, Repeatable Location Platforms for Growth-Stage Portfolio Companies

The most powerful compounding advantage a PE-backed growth company can have is a disciplined, data-driven location strategy that can be executed at speed. Without it, the company that works in five locations has no reliable playbook for getting to 50. With it, growth becomes a process rather than a series of individual bets.

This matters enormously in sectors where PE firms are pursuing buy-and-build strategies at scale: healthcare clinics, specialty retail, behavioral health, dental, veterinary, physical therapy, urgent care, and similar service-based businesses where physical locations are the delivery channel. Add-on acquisitions accounted for 40% of total PE buyout deal value in 2024, according to McKinsey, the second-highest ratio in a decade. The companies executing those add-ons successfully are the ones with a repeatable site selection infrastructure underneath them.

Site Selection Group has opened more than 500 Applied Behavior Analysis (ABA) therapy clinic locations for PE-backed operators over the past several years. ABA clinics serve children and adolescents with autism spectrum disorder and require a specific operational footprint. It typically requires 3,000 to 6,000 square feet, an accessible first-floor or single-story space, proximity to pediatric patient populations, adequate parking, and, in some cases, sensory-specific build-out requirements. None of that is complex in isolation. At scale, however, the difference between having a rigorous market analysis and site scoring model versus relying on opportunistic real estate decisions is the difference between a portfolio that expands efficiently and one that accumulates problem locations.

The scalable location platform we build for growth-stage companies includes market prioritization sequencing (defining which geographies to enter first and in what order based on patient or customer demand density, competitive white space, and operational efficiency) along with trade area analysis, prototype scoring criteria, lease negotiation standards, and build-out cost controls. When that infrastructure is in place, opening the 40th location looks operationally similar to opening the 10th. The consistency compresses timelines, reduces site selection errors, and creates a documented growth asset that enhances exit valuation.

For any PE firm with a portfolio company in a location-dependent service or retail category, this is the question that determines whether growth is accretive or dilutive: Does your portfolio company have a site selection process, or does it have a real estate broker?

2. Monetizing Owned Real Estate Through Sale-Leaseback Transactions

Many operating companies acquired by private equity firms hold real estate on their balance sheets, such as manufacturing facilities, distribution centers, clinic buildings, office campuses, and branch networks that represent significant locked-up capital. A sale-leaseback transaction converts owned real estate into cash while preserving the company’s ability to operate from the same locations under a long-term lease. The capital released can fund acquisitions, pay down debt, fund organic growth, or improve the fund’s overall return profile.

The arithmetic of a well-structured sale-leaseback is compelling. Real estate investors (net lease REITs, institutional funds, private buyers) typically price commercial property at cap rates of 5 to 8%, depending on asset quality, location, and lease term. Operating businesses, meanwhile, are often valued at EBITDA multiples of 8 to 15 times or higher. When a company sells a building at a 6.5 cap rate (roughly 15x the annual rent) and reinvests those proceeds into the business at an 8 to 12x EBITDA multiple, the multiple arbitrage can be meaningfully positive. The company creates more value by recycling that capital into operations than it would by holding the real estate.

Beyond multiple arbitrage, sale-leasebacks serve other important functions in the PE context. They improve a company’s leverage profile by converting real property assets into operating cash. They simplify the balance sheet, which matters in diligence and in exit processes. They provide capital at a point in a fund’s life cycle when traditional debt markets may be constrained.

Site Selection Group recently completed a sale-leaseback transaction for a PE-backed portfolio company that released $30 million in capital from owned real estate. That capital, which had been sitting on the balance sheet as depreciating infrastructure, was redeployed into growth initiatives. The transaction improved the company’s financial profile, gave the private equity sponsor flexibility in its capital allocation, and created an event that meaningfully improved the fund’s liquidity position well ahead of the anticipated exit.

The key discipline in a sale-leaseback is structuring it correctly with lease terms that balance the real estate investor’s need for income security with the operating company’s need for flexibility, renewal options, buyback rights at appropriate milestones, and rent levels that the business can sustain at its projected growth trajectory. A poorly structured leaseback can saddle a company with above-market rent obligations that compress margins at exit. A well-structured one is a genuine value creation event.

3. Cleaning Up the Rollup: Lease Portfolio Rationalization After Add-On Acquisitions

The buy-and-build strategy has been one of the dominant PE playbooks of the last decade. The appeal is straightforward: Acquire a platform, bolt on 10 to 20 smaller companies in the same sector, realize synergies, and exit at a higher multiple. The execution reality is more complicated. Nowhere is the complexity more visible than in the inherited lease portfolio.

When a PE firm assembles a rollup of 15 regional operators, it does not acquire 15 locations. It acquires 15 lease portfolios, each negotiated independently, each with different terms, different landlords, different expiration timelines, and some percentage of locations that are redundant, underperforming, or simply in markets the combined entity does not need to serve. Those leases are liabilities on the balance sheet and a drag on operational efficiency. Left unmanaged, they become a significant headwind to the exit multiple.

Site Selection Group has been engaged by numerous PE-backed rollup companies specifically to rationalize these inherited portfolios. The work involves several distinct workstreams. A lease audit and inventory establishes a clear picture of every lease obligation across the combined entity, with expiration dates, renewal options, termination rights, landlord relationships, and current market value relative to contracted rent. Portfolio mapping identifies geographic redundancies, underperforming locations, and locations that can be consolidated without a meaningful revenue impact. Execution management then pursues lease buyouts where economics support paying to exit early, lease terminations where landlord circumstances allow it, sublease opportunities where excess space can generate income, and lease renewals where favorable terms can be locked in.

The financial impact of this work is often significant. Eliminating lease liabilities that the business does not need removes obligations that weigh on EBITDA and creates a cleaner, more defensible cost structure for a buyer. In healthcare and service-based rollups, where occupancy cost is the second-largest expense category after labor, the improvement in margin profile can directly translate into a meaningfully better exit multiple.

This is increasingly critical work given the volume of PE rollup deals currently sitting in portfolios at extended hold periods. McKinsey estimates that more than half of buyout-backed portfolio companies globally have been held for four years or longer. Many of those companies carry lease portfolios assembled during aggressive add-on periods that have never been systematically reviewed. For PE firms beginning to think seriously about exit preparation, lease portfolio rationalization is one of the highest-ROI operational improvements available.

4. Building a Real Estate Function: Getting the Right Infrastructure in Place

A surprising number of PE-backed companies, including those with 50, 100, or more physical locations. operate without a coherent internal real estate function. Lease decisions are made reactively. Nobody tracks expiration dates systematically. Build-out costs vary wildly by location because there is no standard procurement process. Renewals get executed at whatever terms the landlord proposes because no one is negotiating from a position of data or leverage.

This is not a failure of leadership. It is a structural gap that is extremely common in companies that grew quickly through acquisition or organic expansion without building the corporate infrastructure to match their footprint. The problem is that it is expensive. Unmanaged real estate is leaking value in multiple ways simultaneously, through above-market rents, missed renewal negotiations, costly build-outs, reactive occupancy decisions, and a lack of visibility into a cost category that typically represents 5 to 15% of revenue in location-dependent businesses.

Site Selection Group works with PE-backed companies to stand up real estate functions that provide the control and visibility that a 50-plus location company requires. This includes establishing a lease abstract and tracking system that gives the CFO and operating leadership a complete view of all lease obligations and critical dates in real time. It includes developing a real estate approval process with standardized criteria for new location decisions. It includes building a preferred vendor network of architects, contractors, project managers, and furniture vendors that delivers consistent quality and pricing. And it includes establishing relationships with regional brokers across key markets so that the company is not dependent on whoever calls them when a space becomes available.

The value creation from this work is often invisible in any single transaction but cumulative and substantial. A company that pays market rent rather than above-market rent across 80 locations, and renews on favorable terms rather than landlord-favorable terms, and hits build-out budgets consistently rather than running 20% over on every project, is a structurally more profitable company. When that company goes to market, buyers see an organization that manages its cost structure professionally, and that perception of institutional-grade management has real value in a diligence process.

For PE firms preparing a portfolio company for exit, getting real estate infrastructure in place 18 to 24 months before going to market is one of the most straightforward improvements available. It does not require a transformation. It requires a process.

5. Lift and Shift: Reducing Operating Costs Through International Location Strategy

The fifth real estate strategy is not about the physical footprint of the operating company’s retail or clinic locations. It is about where the company's back-office, administrative, contact center, and shared service functions are housed and whether those functions need to be where they are.

For a significant number of PE-backed companies, particularly those in financial services, healthcare administration, technology services, and consumer businesses, 20 to 40% of total headcount is in functions that could be performed from a lower-cost domestic market or from an international location without any meaningful impact on customer experience or operational quality. Contact center operations. Billing and revenue cycle management. IT support and development. Finance and accounting shared services. HR administration. These functions may exist in expensive markets because that is where the company was founded, not because that is where they need to be.

A well-executed lift-and-shift strategy to relocate these functions to a market with materially lower labor costs can reduce the cost of those functions by 40 to 70%. For an international move to a mature outsourcing market such as the Philippines, India, Egypt, or Colombia, labor cost savings are substantial. For a domestic move from a high-cost coastal market to a secondary or tertiary U.S. market, savings of 20 to 35% are achievable with the right location analysis. Either path requires the same analytical foundation: labor market analysis, wage benchmarking, workforce availability assessment, real estate and infrastructure evaluation, and incentive optimization.

Site Selection Group executes these engagements with the same rigor we apply to any major location decision. The analytical work identifies which markets can support the operation’s scale, offer the right talent profile, and produce the best total cost of operation after accounting for real estate, labor, incentives, and operating costs. The resulting savings flow directly to EBITDA, not as a one-time event but as a permanent improvement to the cost structure that compounds through the hold period and enhances exit multiple.

For a PE-backed company with $50 million in annual labor expense in back-office functions, a 30% reduction in those costs represents $15 million in annualized EBITDA improvement. At an 8x exit multiple, that translates to $120 million in enterprise value. That is not theoretical. Site Selection Group has executed these analyses and transitions for multiple PE-backed companies, and the returns on the advisory investment are among the most measurable in our entire practice.

The Common Thread

These five strategies share a common characteristic: They are all operational improvements that create financial value, and they all require expertise that most portfolio companies do not have in-house.

PE firms have operating partners for financial modeling, for technology transformation, for talent management, and for commercial strategy. 

Real estate strategy (location selection, lease management, sale-leaseback structuring, portfolio rationalization, and operational footprint planning) deserves the same level of professional advisory engagement. It affects EBITDA directly. It affects the balance sheet directly. It affects how buyers perceive the quality of management during diligence. And the hold period, which now averages more than six years, is more than long enough to implement all five of these strategies and realize the full benefit of each before going to market.

The private equity firms that are winning in the current environment are the ones that treat every operational lever with discipline. Real estate is one of the most underutilized. The firms that recognize that early in the hold period have a meaningful advantage over those that address it at exit when the time to realize the full value has already passed.