Examine the toolkit of a commercial property owner, and the not-so-secret compartment, labelled ‘sale and leaseback’, is always present.
For some, it is a last resort option, its glass case to be smashed open only in case of emergency.
For others, it is a handy Swiss army knife of a tool, offering the ability to unlock capital that would otherwise be stored in the secure vault of bricks-and-mortar.
Struggling, Dutch, car maker Spyker has recognised this, announcing plans to try and raise capital to pay off suppliers and resume output at its Swedish subsidiary, Saab.
Spyker bought Saab in 2010, aided by a £354m European Investment Fund loan, guaranteed by the Swedish government. Now in financial difficulty, it seeks to utilise Saab’s commercial property portfolio, most recently valued at €248.8m, by negotiating a sale and leaseback deal, subject to governmental agreement.
Most commercial property owners won’t need government go-ahead to proceed with a sale and leaseback; its flexibility is often the attractive part of a deal. Then there are the tax breaks, the minimal disruption to existing operations and the benefits of transferring the risk and responsibility of a commercial property to a third party, allowing a company to redirect resources toward developing its core business.
Prices may have taken a hit in recent years, but longer-term commercial property owners are advised to check the value of their portfolio. Added encouragement comes from an Investment Property Databank Limited report, which states that the value of commercial property rose by 6.9% last year. This figure was admittedly inflated by London property prices but, still, it was the first rise in four years.
Commercial property owners will be well aware of regulatory requirements to link development plans with sustainability commitments. And, in the current economic climate, with banks reportedly unwilling to lend to SMEs, recycling capital through a sale and leaseback may be the most sustainable act an owner can commit to.
Previous Post
Open Plan Office Space, The Pros And Cons
