January 5, 2007—Sale-leasebacks are increasingly taking a new shape as corporations look to reduce ownership of property and increase flexibility. More than one third of respondents to a CoreNet Global Experts Survey released recently indicate that they have experience doing portfolio sale-leaseback transactions, or plan to do one in the near future.
The study from CoreNet Global’s Applied Research Center also found that portfolio sale-leasebacks, unlike deals for single pieces of property, have many similarities to capital market transactions and should be managed accordingly. Respondents indicated that capital market expertise is important for the sellers as private investors, pension funds and REITS, among others, represent over 30% of the buyers of large portfolios of property.
“More and more, companies are choosing to conduct one transaction and get rid of thirty pieces of property, rather than 30 transactions to dispose of 30 pieces of property,” says Eric Bowles, Director of Global Research for CoreNet Global, the Atlanta-based association of workplace and corporate real estate executives.
On the other side of the deal, respondents also indicated that expertise with large transactions, real estate experience, and a history with capital markets are the most important considerations when selecting professional assistance to manage large sale-leasebacks.
According to the study, respondents expect the quantity of space owned to decrease as leasing becomes more prominent. The CoreNet Global study predicts that 6% of property would shift from owned to leased property over the next five years. Among the sample surveyed, 52 percent of property is currently owned rather than leased by companies.
“While a 6% shift may seem small in percentage terms, in reality it’s a tidal shift. Translated, for our members that’s $72 billion out of $1.2 trillion worth of real estate being sold and leased back in the commercial real estate market over the next five years,” said Eric Bowles, Director of Global Research for CoreNet Global.
CoreNet Global members manage $1.2 trillion in worldwide corporate consisting of owned and leased office, industrial and other space. For more information, see the Web site.
