Jones Lang LaSalle Counts £7.7 Billion in Sale Leaseback Transactions in 2007

Property Week - February 15, 2008

The 2007 Jones Lang LaSalle Portfolio Market Review, published last week, showed that the volume of sale and leasebacks peaked in 2007, as growing numbers of occupiers looked to extract value from their property portfolios. The report identified a total of £7.7 billion in sales in 96 portfolios – up from £6.7 billion in 72 portfolios in 2006.

The report said: ‘Despite recent market conditions, these continued to sell where positive sentiment towards the leaseback covenant existed.’

Sale and leasebacks accounted for 43% of transactions, whereby corporate occupiers sold £3.3bn of property assets. The remaining 57% were investment property portfolios.

The most sizeable transactions the £400m Macdonald Hotels portfolio, the £400m Thistle Hotels portfolio and the £680m Capio Healthcare portfolio all took place in the first two quarters of 2007.

JLL states that, although the third quarter appeared to confirm a decline in activity as the credit crunch took hold, ‘the Royal Bank of Scotland’s £800m Acorn Portfolio bucked this trend and the year drew to a close with optimism for 2008’.

Mark Cotterall, head of global real estate for BT and CoreNet Global UK Chapter board member, said: ‘The reason corporates do sale and leasebacks is to release asset value.

Richard Shepherd-Cross, a director at Jones Lang Lasalle, said: ‘The portfolio market appeared to buck the trend of reduced market turnover, which we were seeing across the board last year this was a result of corporate sale and leasebacks, which propped up sales. Ignoring corporate sale and leaseback activity general market turnover in the portfolio market was down 20% in 2007.

He added: ‘Whereas corporate sale and leasebacks accounted for only 20% of portfolio sales in 2006, they accounted for over 40% in 2007. Of this, it was the banks and hoteliers who contributed to over 40% of the sale and leaseback activity.’

Shepherd-Cross predicted that ‘2008 will see a reduction in sale and leaseback activity as current market yields make it less attractive to the corporate owner’. Sphere: Related Content