S & LB transactions continue to play major role in European Property Investment Market in 2009.

Corporate sale and leaseback transactions have maintained a prominent role in the European property investment market despite the downturn, according to a new report by CB Richard Ellis.

In the first half of 2009, an exceptionally quiet period for investment turnover, €4.1 billion in occupier disposals accounted for 17 per cent of the European real estate investment market.

Following the emergence of the sale and leaseback model in Europe over the last few years – growing from six per cent of the overall market in 2004 to 19 per cent in 2008 – sale and leasebacks have established themselves as a key and resilient part of the European property market.

John Wilson, Head of Corporate Strategies within CBRE’s Global Corporate Services business, said: “The sale and leaseback market has continued to prosper despite investor caution because these transactions create long and well-secured income streams for the purchaser and often involve prime assets – precisely the kind of opportunities investors are looking for at the moment. What we have also noticed is that these transactions are expanding across more countries and business sectors. We were working on around €1.5 billion of deals in this area in mid-2008, and this has climbed to around €3 billion this year.”

Willem Hendrik van de Wetering, Senior Director Capital Markets: The Dutch figures follow the same development as the European trends. In H1 2009 we registered for approximately € 225 million S&LB transactions, which means a 16% share in the total market. In contradiction to the European development these transactions mainly concerned ofice and logistic space. Striking examples are large-scale distribution centres like the TDG site in Veenendaal, Office Depot in Zwolle and Paperlinx in Diemen and Zutphen. An important sale and leaseback in the office sector was the sale of the office of Trias in Gorinchem to the Hungarian fund Fotex."

John Wilson: “One of the key drivers of this market today is the present economic climate. For corporates to expand their business, to create a ‘war chest’ for acquisitions, or even to fund the core business operations through a difficult period, sale and leasebacks have become a popular way to achieve this.

“The reality is that more and more organisations are looking at sale and leaseback as a means to raise capital in a world where finance has become hard to come by. It is clear that, for the right companies, with the right properties and the right investors, the option of sale and leaseback is a compelling one.
“This is a legitimate source of capital that needs to be considered with the same weight as any other source of equity or debt. To corporates facing a choice between issuing a bond or creating a known finite rent liability, possibly at a below market levels by disposing of real estate assets, the choice is between raising capital that has to be repaid at some stage versus a capital generation option which doesn’t create a repayment obligation.

Click on the pdf below for the full report

European Sale and Leaseback