Many traditional mid-market PE firms which focus on buying companies for their cash flows and do not have any real estate groups will try to avoid having to buy a lot of real estate in order to complete an LBO. This is because they prefer to focus on their core competencies in buying companies with recurring cash flows, and do not wish to go outside of their expertise to analyze, value, and absorb the returns and risks of holding real estate.
If the company they are targeting has a lot of real estate, they may do a sale-leaseback upon acquisition. This is where they sell the real estate to another party and pay rent to them on previously agreed terms.
Real estate analysis is typically very different from analyzing the recurring cash flows of a company, and it also carries certain risks. For example, if the target company owns real estate in which they are making rental income, the PE firm needs to do a separate analysis of the net operating income derived from its tenants as well as cap rates. They would have to analyze the creditworthiness of tenants, tenant contracts, operating expenses, trends in the local real estate market, local demographics, regulation, etc.
In other words, real estate analysis is an entirely different world than standard PE acquisitions of companies with recurring cash flow, and the PE firm may not be well equipped to perform this analysis which is often very different depending on the geography and type of real estate. Larger PE firms with real estate groups, however, may be more willing to collaborate and perform this type of analysis, so this avoidance of real estate is more common in mid-market PE funds that may not have a real estate investment group.