SUCCESS STORY
INTERNATIONAL OILFIELD SERVICES COMPANY
Sale/Leaseback Transactions
A large international oilfield services firm coming off of an aggressive acquisition program, found itself highly leveraged. When the price of oil dropped by over 70% and revenues plummeted, they began considering various strategies to create liquidity. The firm owned several facilities in the Houston area including a multi-building facility on a large tract in the Houston Ship Channel area, and determined a sale and leaseback of the properties was the appropriate strategy. A discreet marketing approach was chosen targeting a handful of qualified buyers. While the properties were attractive and the long-term leases appealing, several of the investment funds were unable to proceed due to the firm’s high debt levels. Additional word-of-mouth marketing ultimately located an institutional real estate investor/developer and a deal was structured on the larger property, providing significant liquidity for the client. A transaction was also closed on the smaller property with a local investor.
The Process
- Determine a rental rate that works for the seller that is in line with market rates
- Select a target cap rate but understand that the market will establish the cap rate
- Set up a customized website with full marketing package and due diligence documents
- Establish a time line for tours, offers, feasibility period and closing
The Results
- The competitive process, even with a smaller number of prospects and bidders, ensures a market price
- Appropriate securitization can offset perceived “industry risk” and “credit risk” while maintaining a higher market price
- A repurchase option allows the seller to repurchase the property when conditions improve in the future
- The absolute net lease allows the tenant total control of the facilities with a passive investor as landlord