Ten years of sale‐and‐leaseback transactions in The Netherlands

Abstract

PurposeThe purpose of this paper is to give an overview of the sale‐and‐leaseback transactions in The Netherlands over the past ten years, and to compare the rents and yields in those transactions with what is common on the market at that moment.Design/methodology/approachThe method chosen is a straight mathematical calculation, the only possible way at this initial stage. A unique dataset provided by Vastgoedmarkt is used for this paper.FindingsOf the sale‐and‐leaseback transactions, 60 percent are concluded against a higher rent than the market rent, and contract rent for the biggest areas is on average concluded at 17.4 percent above the market rent.Research limitations/implicationsBecause of the incompleteness of the reporting of the transactions and the lack of transparency in this area, further analysis is necessary.Practical implicationsWhen entering into a sale‐and‐leaseback transaction, the seller and the buyer in particular should be much more aware of the circumstances on the market.Originality/valuePrior papers on sale‐and‐leaseback generally do not consider rents and there are almost no recent papers. This paper does focus on rents and uses data from the past ten years.

The problematic differentiation between property bonds and leases in healthcare provision

“…In a study of ten years of sale and leasebacks in the Netherlands 60 per cent of the transactions were concluded against a higher rent than a market rent (Hordijk et al, 2010). The majority of the properties in this study were offices, industrial and retail units, a sample far from the problems raised by specialist buildings (Richard, 2003).…”

“…The opinion of Interviewee 2 was then sought on the method by which initial rents were assessed when structuring such sale and leaseback property bonds. The work of Richard (2003) emphasises the importance of rent in specialist property bond creation whilst the work of Hordijk et al (2010) emphasises the importance of the initial rent, which is often set at a level higher than market rental value. Interviewee 2 indicated that initial rents on such healthcare investments are not necessarily found by reference to a fair maintainable trade assessment and the EBITDA that they flow from.…”

“…The main area of mis-pricing of risk seems to lie in the area of the initial rent. Plainly, initial rents in sale and leaseback property bonds are often higher than market rental values (Hordijk et al, 2010). This is a potential investor problem when the rent is secured against a good covenant in a standard type of property.…”

The impact of sale and leaseback on commercial real estate prices and initial yields in the UK

“…The primary objective from a seller's perspective in undertaking SLB is the finance motive of releasing capital from real estate ownership (Devaney and Lizieri, 2004;Hordijk, Rompelman and Koerhuis, 2010). This new capital can be used for company expansion in the core business sectors, while retaining occupation of the premises.…”

“…Other SLB research concentrating on the motivations of the seller and buyer has been undertaken by Barris (2002), Whittaker (2008) and Ling (2012). The study of yield is important since, in addition to lease length, it is a key factor influencing SLBT price (Hordijk, Rompelman and Koerhuis, 2010). In completing such a SLBT, the return must compare favourably to alternative investments available in the market.…”