Business Facilities - July 2008 - (Page 50)

REAL ESTATE TRENDS By Kenneth Rudy, Managing Director, Jones Lang LaSalle With the availability of capital squeezed by the global credit crunch, corporate facility sale-leasebacks are emerging as an increasingly large component of real estate investment sales worldwide. T he global credit crunch has had wide-ranging effects on many international markets, in some instances shrinking the availability of capital not only for corporate growth, but also for refinancing existing corporate debt. As a result, corporate facility saleleasebacks are emerging as an increasingly large component of real estate investment sales worldwide. Sale-leasebacks, wherein an owneroccupier sells a property to an Kenneth Rudy is managing director of Jones Lang LaSalle’s Corporate Capital Markets group. He is responsible for developing and executing financial strategies which incorporate occupancy and financial objectives for the firm’s strategic alliance and major occupier clients. He has more than 24 years of experience in real estate and holds a bachelor’s degree in finance from the University of Texas and a Master of Management degree from Northwestern University’s Kellogg Graduate School of Management. He serves on Jones Lang LaSalle’s Americas Corporate Solutions Board, the Public Institutions Advisory Board and the Global Capital Markets Board. investor while maintaining occupancy through a lease, allow corporations to raise precious capital; it can often provide sellers with an immediate, positive earnings impact. Saleleasebacks also offer corporate owner-occupiers the added benefit of removing the non-earning asset from the balance sheet and transferring the long-term disposition risk to a new owner-investor. Globally, there were about $88 billion worth of global corporate dispositions in 2007—representing more than 10% of the total $817 billion in investment sales for the year. Of that $88 billion, $56 billion were in corporate sale-leasebacks. In 2007, the volume of U.S. corporate saleleasebacks was approximately $13.5 billion or about 15% of all global corporate dispositions. Sale-leasebacks have a stable cash flow via leases that usually last 10 years or more and often cover ongoing capital repairs and maintenance during the lease term. Those benefits stand in contrast to multi-tenant buildings in which tenant rollover and near-term vacancies create uncertainty around income from the property. Sale-leasebacks can be structured to fit a corporation’s strategic goals. For example, Jones Lang LaSalle recently represented a major technology firm that downsized its space requirements on its 1 million-squarefoot campus (while holding development rights for an additional 450,000 square feet). The firm’s main goal was to redeploy capital from owned real estate to core business functions by monetizing assets, reducing its occupied footprint and realizing the value of the undeveloped parcels. Through a broad capital markets and investor marketing campaign, the firm was able to sell and lease back the occupied buildings at market rents, for varying terms and with long-term renewal control rights. In addition, the central plant and amenities center were sold off, with the required proportion to serve the client’s needs licensed back. The buyer received a stable yield from the long-term leased facilities as well as the upside potential of developing additional buildings to lease or sell to other tenants. 50 JULY 2008

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Business Facilities - July 2008 Contents First Word Snapshots Corporate Moves: New York The 2008 Business Facilities Rankings Report 2008 Rankings: Biotech Blasts Off 2008 Rankings: Green with Envy 2008 Rankings: Warm Climate for Business Nanotech Looms Large in Pennsylvania Metro Spotlight: Inland Empire, CA Food Processing Sites: Providing Sustenance as Well as Nutrition Sale-Leasebacks: Easing the Credit Crunch Corporate Moves: Georgia Metro Spotlight: Albuquerque, NM Advertiser Index Inside LiveXchange

Business Facilities - July 2008

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