Once Again Time For Corporate Sale/Leasebacks?

By:  Allen C. Buchanan, Principal
Lee & Associates

In 2003, when California was in a world of hurt with worker’s comp rates, employers leaving the state, driver’s licenses for illegals (which all lead to Governor Gray Davis being terminated by the Terminator), we saw a huge amount of sale/leaseback activity from national corporate occupants.

Aquatics-Lasco Bathware, Akzo Nobel, Johnson Controls, Smurfit Stone, Parker Hannifin, Illinois Tool Works, Limbach…and many others sold manufacturing locations in Southern California and leased them back from the owners. Why, you may be wondering? Provide me your forbearance, while we hear from our sponsor, and I will explain my views…

I provide Location Advice to owners and occupants of industrial buildings in Southern California…AKA, I sell and lease commercial real estate for a living and have since 1984. I have been involved with many of the deals listed above which should qualify me as an expert of sorts…if I can only remember…

The two main reasons in 2003-2005 that many national (multi location) companies sold their locations and leased back, were real estate values and the business climate in Southern California. By selling the locations when the market was at its value peak and leasing back for a three to five year time frame, the companies maxed the real estate equity and could decide at the lease expiration whether to stay in California or consolidate into another location. Some stayed, but many left.

In my opinion, another perfect storm is approaching that could portend another round of sale/leasebacks…this time from closely held owners of real estate.

So, what are the reasons that a company should consider a sale/leaseback?

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