Occupiers Sold on Sale and Leasebacks

Property Week - December 18, 2009

What do General Motors, Marks & Spencer and HSBC have in common?

These corporate giants carried out some of the most notable sale and leasebacks of the past 10 years.

Occupiers’ motivations for sale and leasebacks in the 2000s varied. In 2001, gym chain LA Fitness took that route for its 37 gyms so it could double its property portfolio and venture into the Spanish market.

Similarly, baa Lynton, the commercial property division of airport operator BAA, sold and leased back a 15 acre site in 2002 to fund the development of Heathrow’s Terminal 5.

The supermarkets, each vying to become the dominant chain, were behind some of the biggest sale and leasebacks of the decade.

Sainsbury’s started in 2000, when it sold 10 stores for £226m to an offshore special purpose vehicle.

Topland Group had its hands full as buyer of a £348m purchase and leaseback of 78 Marks & Spencer shops in 2001 and then a £675m portfolio of 33 Tesco properties and distribution centres in 2002.

As the decade drew to a close, occupiers turned to sale and leasebacks to raise much-needed cash in the credit-starved world of the global financial crisis.

“It was and always has been a cheaper source of debt,” says Julian Lyons, European property director at General Motors, which last year was aiming to raise €200m from the sale and leaseback of its European property assets.

“The past decade has seen occupiers undertake sale and leasebacks sometimes as a pure liquidity play, or with a slack in the economy when money is scarcer. The other reason is simply when an occupier realises that the cost of capital tied up in property is not part of their strategy any more.” Sphere: Related Content