According to Colliers International’s latest research, Sale and Leaseback (SLB) activity accounts for 10% of all European commercial real-estate investment transactions reported since 2007, while SLB transactions in Eastern Europe represent a meager 4,5% of the historic investment turnover.
SLB Transactions in Europe Trending-Up
Investment market transactions across Europe since 2007 show that SLBs, as a proportion of all transactions, increased during the post-Lehman crisis, reaching to around 13% of all market activity in 2008, while falling back to around 7.2% in the more buoyant investment period of 2011. As of mid 2012, the volume of SLB deals in proportionate terms has again started to trend-up, as overall deal-flow and market conditions tighten.
Low SLB activity in Eastern Europe
SLB transactions have figured less prominent in Easter Europe over the last decade or so, subject to caveat regarding owner funded leaseback structures and the lack of transparency or reporting of transactions, representing only 4.5% of all transactions in Eastern Europe, half of the proportion of deals conducted across Europe as a whole.
Although no SLB transactions have been recorded during 2012 to date, the current market conditions comprising a combination of restricted credit, muted economic growth and subdued debt provision provide a strong platform for Sale and Leaseback (SLB) investment transactions to occur.
In Greece SLB’s reached their peak between the period of 2005 – 2007 because of the economic prospects, market trends and momentum for reinvesting capital. The current reality of the commercial real estate market is that it has become an investment market driven by equity players. Ana Vukovic, Managing Director of Colliers International in Greece stated: “If the current market conditions in Greece persist, SLB’s could be a growing source of capital raising and investment deals over the short and medium term. SLB’s as an investment tool can benefit both the corporate entities and the investors, the first group by allowing them to raise cash and the other one to secure long term income streams with attractive returns”.
SLB Sales by Sector
- Industrial/logistics sector, the busiest in the region, conducted close to 35% of all SLB transactions, i.e. the sale of Kuehne & Nagel’s portfolio of Polish properties in 2008 from Goodman’s European Logistics Fund for ca. €220 million.
- Retail accounted only for 22% of the market as SLB practitioners; multi-let retail schemes are far more complex than single-let covenants, i.e. the acquisition of Konzum across Croatia by WP Carey in both 2008 and 2010 for an estimated combined €103 million.
- Office sector accounts for approximately 27% of all deals, i.e. the sale of Prokom’s office in Gdynia, Poland in 2007 to First Property for about €68 million.
SLB Sales by Country
- The Czech Republic leads the way having conducted fifteen SLB transaction, comprising over 27% of all activity.
- Hungary and Poland have seen an equal amount of deals, nine apiece and account for ca. 17% of all activity respectively.
- Collectively these countries account for 63% of the SLB market.
- Russia witnessed a total of eight deals, followed by Romania with seven, which combined make up just over 25% of the market.
- Of the remaining 12% only Croatia (4), Slovakia (1) and Bulgaria (1) have seen any direct SLB deal activity.