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In the July 2008 Issue of Property Investor News
Bank Leasebacks
As a regular attendee at auctions, one particular trend I have noticed of late is the significant increase in the volume of sale and leaseback properties at commercial auctions, particularly for banks.
At Jones Lang LaSalles recent auction which took place on 22nd May in Londons Dorchester Hotel, 59 lots were featured and of these at least 20 of them were sale and leasebacks, predominantly from Barclays. Of these 20, 16 sold which emphasises the popularity of this market. The average price of a lot was around £414,500 with the most expensive lot costing £1.9m (London) and the cheapest costing £190,000 (Birmingham) and the average yield was 6.4%.
However, its not just banks that do sale and leasebacks. In King Sturges first auction in the beginning of July, sports facilities were on offer as sale and leasebacks.
Charlie Powter, Jones Lang LaSalles director of auctions, says: "Banks have accounted for a large proportion of this sale and leaseback market although there has been considerable involvement from others such as First Quench, Moss and Lloyds Chemists, bookmakers such as William Hill and Corals, Kwik Fit, some of the supermarkets and Barratts to name but a few! Lately, there has been some sale and leaseback activity in non-traditional sectors such as car showrooms, doctors surgeries and dental practices."
Sale and leasebacks often occur because of a real need for the company to raise cash. James Cannon, auctioneer at Savills Commercial, says: "A company has a number of things to consider if they need to raise cash and are thinking of doing a sale and leaseback. The following questions are mandatory for the company to answer: Why are we driven to do this? What is the cost of raising money through a sale and leaseback compared to other ways of raising money? Can we borrow or do a share issue? Sale and leasebacks arent an option for everybody."
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