Sale-Leaseback Sticker Shock

Wall Street Journal - July 15, 2009

Demand for corporate sale-leaseback real-estate transactions is picking up across the U.S. as companies seek a fast way to raise cash to ride out the recession. But a scarcity of buyers and low bids mean fewer deals are actually getting done.

Sale-leaseback transactions -- where a company sells its office building, plant or other property and then leases it back from the new owner -- is an alternative form of financing that some companies turn to when traditional financing, such as bank loans, are harder to obtain. During the first five months of this year, the value of U.S. sale-leaseback transactions declined to $853 million, compared with nearly $3 billion in the year-earlier period, according to Real Capital Analytics, which tracks deals greater than $5 million.

Part of the drop in transaction value reflects lower real-estate values, but the biggest issue is that buyers and sellers are so far apart on price that many transactions fizzle when sellers walk away. Just 63 deals were completed between January and May, compared with 174 in the first five months of 2008, according to Real Capital Analytics. Sphere: Related Content