A practical, deal-ready LOI framework built for buyers and sellers of 3PL operators, industrial storage facilities, and regional warehouse businesses in the $1M–$5M revenue range — covering real estate structure, earnouts, and due diligence terms specific to this industry.
A Letter of Intent (LOI) is the foundational document in a storage or warehousing business acquisition. It establishes the agreed-upon framework for purchase price, deal structure, due diligence rights, and exclusivity before both parties invest significant time and legal fees in definitive agreements. In the storage and warehousing industry, LOIs carry unique complexity because they must address the bifurcation of real estate and operating business value, environmental assessment rights, customer contract assignment, and warehouse management system transition. A well-drafted LOI protects both buyer and seller by surfacing deal-critical issues early — whether that is a legacy environmental liability on the property, a customer concentration risk among the top five accounts, or a real estate leaseback structure that will govern the buyer's long-term cost base. Buyers using SBA 7(a) or 504 financing should ensure LOI terms are compatible with lender requirements before presenting. Sellers should treat the LOI as their first opportunity to establish valuation expectations and protect against deal retrading during due diligence. This guide walks through every major section of a warehousing and storage LOI with example language, negotiation notes, and common mistakes that derail deals in this specific industry.
Find Storage & Warehousing Businesses to AcquireParties and Transaction Overview
Identifies the buyer entity, seller entity, and the legal structure of what is being acquired — the operating company, the real estate, or both. In storage and warehousing deals, it is critical to specify whether the acquisition includes the underlying industrial real estate or is structured as a business-only purchase with a concurrent real estate leaseback from the seller.
Example Language
This Letter of Intent is entered into by [Buyer Entity Name] ('Buyer') and [Seller Name / Entity Name] ('Seller') and sets forth the proposed terms under which Buyer intends to acquire 100% of the membership interests (or assets, as applicable) of [Business Legal Name] ('Company'), a [state] [LLC/Corporation] engaged in the operation of a third-party logistics and storage facility located at [Facility Address]. The acquisition shall include [Option A: the real estate parcel identified as APN XXXXXX, together with all improvements, racking systems, dock equipment, and warehouse management systems / Option B: all operating assets of the Company, excluding the real property, which shall be subject to a separate long-term triple-net lease agreement between Buyer and Seller concurrent with closing].
💡 Sellers who own the real estate should insist that the LOI explicitly values the OpCo and real estate separately to prevent buyers from conflating the two into a single suppressed multiple. Buyers should confirm whether SBA 504 financing — which is specifically designed for real estate plus equipment — is preferable to an SBA 7(a) structure given the asset mix. If a leaseback is contemplated, negotiate the NNN lease term, base rent, and annual escalators in the LOI itself, not as a post-LOI afterthought, as these terms directly affect the operating company's normalized EBITDA.
Purchase Price and Valuation
States the proposed total purchase price, the allocation between business value and real estate value if applicable, and the EBITDA or revenue basis used to derive the price. Storage and warehousing businesses in the lower middle market typically trade at 3.5x–5.5x EBITDA, with real estate valued independently via commercial appraisal.
Example Language
Subject to completion of satisfactory due diligence, Buyer proposes to acquire the Company for a total purchase price of approximately $[X,XXX,000] ('Purchase Price'), representing a multiple of approximately [4.0x–4.5x] trailing twelve-month EBITDA of $[XXX,000] as represented by Seller. If the real estate is included in the transaction, Buyer's allocation is approximately $[X,XXX,000] attributed to the operating business and $[X,XXX,000] attributed to the real property based on Seller's provided appraisal, subject to Buyer's independent appraisal during due diligence. The final Purchase Price shall be subject to adjustment based on findings during the due diligence period, including but not limited to material changes in customer contract status, occupancy rates, deferred capital expenditures, and environmental assessment results.
💡 Buyers should anchor the LOI price to a clearly defined EBITDA figure — ideally trailing twelve months on an accrual basis — and reserve the right to retrade if customer concentration is worse than disclosed or if the facility requires significant near-term capital expenditure on roof, dock doors, or fire suppression. Sellers should resist open-ended price adjustment language and negotiate specific caps on post-LOI price reductions, typically limiting adjustments to no more than 5–10% of the stated price absent a material undisclosed liability.
Deal Structure and Financing
Outlines whether the transaction is structured as an asset purchase or equity purchase, the anticipated financing mechanism, seller carry terms, and any earnout tied to post-close performance metrics such as customer retention or occupancy rates.
Example Language
Buyer intends to structure the transaction as an [asset purchase / membership interest purchase] financed through a combination of: (i) SBA 7(a) or 504 loan proceeds representing approximately 80–90% of the total transaction value; (ii) Buyer equity injection of at least 10% of the Purchase Price; and (iii) a Seller Note of approximately [10–15%] of the Purchase Price, subordinated to the senior lender, bearing interest at [Prime + 1%] per annum with a [5-year] amortization period. Additionally, Buyer proposes an earnout of up to $[XXX,000] payable over [24] months post-close, contingent on the retention of customers representing no less than [85%] of trailing twelve-month revenue during the earnout period. SBA lender standby requirements will govern the Seller Note during the SBA loan term.
💡 Sellers should push back on earnouts tied to broad revenue retention metrics and instead negotiate earnouts tied to specific, measurable triggers — such as renewal of named customer contracts — with a defined payment schedule and audit rights. Buyers using SBA financing must confirm early that the SBA lender approves the seller carry structure, as some lenders restrict seller note terms or require full standby during the SBA loan repayment period. If the deal includes real estate, an SBA 504 loan may offer better long-term fixed-rate financing than a 7(a) structure.
Due Diligence Period and Access
Defines the length of the due diligence period, the scope of information to be provided by the seller, and the buyer's access rights to the facility, employees, customers, and financial records. Storage and warehousing due diligence must specifically address real estate condition, environmental status, racking integrity, equipment maintenance records, and customer contract assignability.
Example Language
Upon execution of this LOI, Seller shall grant Buyer and Buyer's advisors a [45–60] day due diligence period ('Due Diligence Period') during which Buyer shall have reasonable access to: (i) three years of financial statements, tax returns, and monthly P&L reports; (ii) all customer contracts, storage agreements, service level agreements, and renewal schedules; (iii) real estate title, survey, zoning documentation, and any existing environmental reports; (iv) facility inspection rights including roof, dock equipment, racking systems, fire suppression, and HVAC; (v) warehouse management system documentation, user agreements, and software licensing; (vi) employee records, compensation schedules, and any union agreements; and (vii) equipment maintenance logs and racking inspection certifications. Buyer agrees to treat all information as confidential pursuant to the existing NDA and to conduct facility visits during normal business hours with reasonable advance notice to minimize operational disruption.
💡 Sellers should insist that customer-facing due diligence — including any direct contact with key accounts — be deferred until after a binding definitive agreement is in place or be conducted only with Seller's written consent and presence. In storage and warehousing, losing even one anchor customer due to premature deal disclosure can materially damage business value. Buyers should request a Phase I Environmental Assessment right explicitly in the LOI, as environmental findings are among the most common deal-killers in industrial real estate acquisitions and cannot be adequately assessed from financial statements alone.
Exclusivity
Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit or entertain competing offers. This is particularly important in storage and warehousing given the time required to assess both the real estate and operating business components.
Example Language
In consideration of the time and expense associated with due diligence and financing activities, Seller agrees that for a period of [60] days from the date of execution of this LOI ('Exclusivity Period'), Seller shall not, directly or through any broker or advisor, solicit, entertain, or negotiate with any other party regarding a sale, merger, recapitalization, or other transfer of the Company or its assets. Buyer shall use commercially reasonable efforts to complete due diligence and submit a draft Purchase Agreement within the Exclusivity Period. The parties may mutually agree in writing to extend the Exclusivity Period by [30] additional days if both parties are actively working toward a definitive agreement.
💡 Sellers should resist exclusivity periods longer than 60 days without a corresponding milestone commitment from the buyer — such as a written confirmation of financing pre-approval or completion of facility inspection. Buyers seeking real estate and SBA financing simultaneously should build in at least 60 days of exclusivity given typical lender timelines. Both parties should agree on a mechanism for extending exclusivity by mutual consent to avoid renegotiating the entire LOI if financing or environmental review takes longer than anticipated.
Conditions to Closing
Lists the key conditions that must be satisfied before the transaction can close, including financing approval, satisfactory due diligence, real estate title clearance, environmental clearance, and customer contract assignments where required.
Example Language
The consummation of the transaction contemplated herein shall be subject to the satisfaction of the following conditions, among others: (i) completion of Buyer's due diligence to Buyer's reasonable satisfaction; (ii) receipt of SBA lender approval and issuance of a loan commitment letter on terms acceptable to Buyer; (iii) assignment or novation of all material customer contracts, storage agreements, and carrier relationships to Buyer without penalty or material modification; (iv) Phase I Environmental Assessment returning no recognized environmental conditions requiring further investigation, or Seller's written commitment to remediate and indemnify for any identified conditions; (v) delivery of a current commercial real estate appraisal supporting the agreed allocation; (vi) Seller's delivery of racking inspection certifications and equipment maintenance records confirming no material undisclosed capital expenditure obligations; and (vii) execution of definitive Purchase Agreement, Bill of Sale, and, if applicable, NNN Lease Agreement in forms mutually acceptable to both parties.
💡 Sellers should negotiate to limit Buyer's ability to invoke unsatisfactory due diligence as a catch-all exit ramp by requiring Buyer to identify specific findings that constitute a material adverse condition. Buyers should ensure customer contract assignment is explicitly listed as a closing condition, as many storage agreements contain change-of-control provisions that require customer consent — a risk that is easily overlooked and can materially affect post-close revenue continuity.
Transition and Seller Involvement
Addresses the seller's role post-closing, including any consulting or employment arrangement, customer relationship handoffs, and the timeline for transitioning operational responsibilities to the buyer or incoming management team.
Example Language
Seller agrees to remain available for a transition period of [90–180] days following the closing date to assist Buyer with customer introductions, staff orientation, vendor relationship transfers, and warehouse management system training. During the transition period, Seller shall be compensated at a rate of $[X,000] per month as an independent consultant. Seller shall introduce Buyer to all customers representing more than [5%] of annual revenue within [30] days of closing. Seller agrees not to compete with the Company within a [50-mile] radius of the Facility for a period of [3–5] years following the closing date and not to solicit the Company's employees or customers during such period.
💡 In owner-operated warehousing and storage businesses, the seller is often the primary relationship holder for anchor customers. Buyers should negotiate a meaningful transition period — typically 90 to 180 days — and tie a portion of the seller note or earnout to active participation in customer introductions. Sellers should ensure the non-compete radius and duration are reasonable given their personal circumstances and geographic market, and should negotiate carve-outs for any business activities they intend to pursue post-sale.
Real Estate vs. Operating Business Valuation Allocation
The single most contested term in storage and warehousing LOIs. Sellers want maximum allocation to real estate to minimize the operating multiple scrutiny, while buyers want clear separation to apply appropriate capitalization rates to each asset class. Agree on the allocation methodology — typically a commercial appraisal for real estate and an EBITDA multiple for the OpCo — before signing the LOI to prevent downstream disputes.
Customer Contract Assignability and Retention Earnout
Many storage agreements are month-to-month or contain change-of-control notification clauses. Buyers should negotiate a closing condition requiring written consent from customers representing at least 75–80% of revenue, and structure any earnout around verified customer retention at 12 and 24 months post-close rather than general revenue targets.
Environmental Indemnification Scope and Cap
Given industrial property exposure, buyers should negotiate a seller indemnification for any pre-close environmental conditions identified during or after Phase I and Phase II assessments, with an indemnification cap tied to the real estate value and a survival period of at least 5–7 years post-close. Sellers should push for a cap and a basket to limit open-ended exposure.
NNN Lease Terms in Leaseback Structures
When the real estate is retained by the seller and leased back to the buyer, the base rent, annual escalators (typically CPI or 2–3% fixed), lease term (minimum 10 years with renewal options), and permitted use provisions must be negotiated in the LOI — not left to post-LOI drafting. A rent that is too high relative to market will suppress the operating company's EBITDA and directly affect SBA lender underwriting.
Deferred Capital Expenditure Credits and Facility Condition Adjustments
Buyers should reserve the right to reduce the purchase price dollar-for-dollar for any deferred maintenance identified during due diligence — including roof replacement, dock leveler repairs, fire suppression upgrades, or racking recertification — above a negotiated threshold. Sellers should cap these adjustments and require Buyer to substantiate claims with third-party contractor estimates rather than unilateral buyer assessments.
Warehouse Management System Licensing and Transition
If the business operates on a licensed WMS platform, buyers must confirm during LOI negotiation whether the software license is assignable, whether there are outstanding subscription or upgrade costs, and whether the seller will remain a reference contact during the post-close technology transition. Proprietary or aging systems may require a full replacement budget that affects deal economics.
Employee Retention and Key Person Risk
Storage and warehousing operations depend on a stable workforce of dock workers, supervisors, and operations managers. Buyers should negotiate representations that no key employees have given notice and include a 90-day post-close retention commitment from named operations personnel as a closing condition or covenant. Non-solicitation provisions for the seller should extend to all current employees, not just management.
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A storage and warehousing LOI typically includes a proposed purchase price structured as an EBITDA multiple of 3.5x–5.5x (with the real estate valued separately via commercial appraisal), deal structure identifying whether the transaction is an asset or equity purchase, financing plan (often SBA 7(a) or 504 with a 10–15% seller note), a 45–60 day due diligence period, 60-day exclusivity, customer contract assignment as a closing condition, and seller transition terms. If the real estate is included, the LOI should separately address the real property allocation and any environmental assessment rights.
Both approaches are common, but the LOI must explicitly address the real estate structure — either confirming inclusion with a separate allocated value or confirming a leaseback arrangement with key lease terms outlined. Leaving real estate treatment ambiguous in the LOI is the most common cause of deal retrading and extended negotiations in industrial property acquisitions. If you are using SBA 504 financing, the lender will require the real estate to be included in the financed transaction, which means the LOI must reflect that structure from day one.
Most storage and warehousing LOIs include a 45–60 day exclusivity period, with a mutual option to extend by 30 days. This timeline is necessary because due diligence in this industry requires facility inspections, Phase I environmental assessments, racking certifications, customer contract review, and SBA lender underwriting — each of which takes time. Sellers should resist exclusivity periods longer than 60 days without buyer milestone commitments such as a signed SBA pre-approval letter or completion of the facility inspection.
Earnouts in warehouse acquisitions should be tied to verified retention of named customers representing a defined percentage of trailing revenue — typically 80–85% — measured at 12 and 24 months post-close. The LOI should specify how revenue is measured, who bears responsibility if a customer leaves due to post-close operational changes by the buyer, and how earnout payments are structured (lump sum versus installments). Vague earnout language tied to total revenue without customer-level specificity regularly leads to disputes.
Buyers should explicitly include the right to commission a Phase I Environmental Site Assessment — and if Phase I identifies recognized environmental conditions, a Phase II assessment — as part of the due diligence period. The LOI should state that an unsatisfactory environmental finding is a Buyer termination right and should include a negotiated seller indemnification for pre-close conditions. Industrial warehouse properties carry meaningful environmental exposure from prior tenants, fuel storage, and hazardous materials handling, making environmental due diligence a non-negotiable component of any LOI.
Most LOIs are non-binding with respect to the purchase price and deal terms, but contain binding provisions covering exclusivity, confidentiality, and each party's obligation to negotiate in good faith. The LOI should explicitly state which sections are binding and which are not. Sellers should be aware that while they retain the right to walk away if definitive terms are not agreed, exclusivity provisions are typically enforceable, meaning a seller who entertains a competing offer during the exclusivity period may face legal liability.
SBA financing imposes specific requirements that must be reflected in the LOI. The seller note must be structured as a full standby note during the SBA loan repayment period or meet SBA guidelines for partial standby treatment. The equity injection minimum (typically 10%) must be confirmed. If an earnout is included, SBA lenders will want to understand how it is structured and may limit its size. For SBA 504 loans covering real estate, the real estate must be owner-occupied and the allocation between business and real estate must be supported by a certified appraisal. Aligning the LOI with anticipated SBA lender requirements before signing saves significant time and prevents renegotiation after lender review.
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