Commercial Property News - January 04, 2007
Portfolio sale-leaseback transactions will become increasingly prevalent for companies looking to increase flexibility and limit property ownership, according to results of a survey released by CoreNet Global's Applied Research Center.
“The real big difference between single-property sale-leasebacks and portfolio sale-leasebacks is more in the flexibility it provides the company,” Eric Bowles, director of global research for CoreNet, said, adding that companies who perform portfolio sale-leaseback deals are given options beyond owning or leasing on a single-property basis. “It’s not just about accessing capital, and it’s not just about redeploying capital.”
Bowles added that availability of capital from large institutional investors will continue to drive the sale-leaseback market, citing the recent $36B purchase of Equity Office Properties Trust by the Blackstone Group as “a clear indicator that there’s a lot of capital in the market, and that capital is available for appropriately-structured deals.”
Corporate real estate executives who responded to the survey also estimated that in the next five years, six percent of property will shift from being owned to being leased. Bowles said the six percent shift equates, for CoreNet members, to $72 billion worth of property that will be sold and leased back during that time.
The Trends in Sale Leasebacks study also found that while 63 percent of respondents said they had experience with single property sale-leasebacks, only 21 percent had experience with portfolio sale-leasebacks, with 16 percent planning to in the future.
One of the biggest hurdles to sale-leaseback transactions, the study found, was an inability to obtain the required price for a property. Also, 37 percent of survey respondents said that of all the internal stakeholders in a sale-leaseback transaction, business unit executives represented the greatest challenge, while 25 percent said chief financial officers do. To mitigate the impact of sale-leasebacks on business unit financials, survey respondents cited support from executive leaders as the most important factor.
The study was compiled from a survey of 29 executives, broken down into 65 percent end users and 35 percent service providers. Eighty-seven percent of the respondents were from Fortune 500 firms, their global equivalents, or their service providers.
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