Opportunity knocks for sale-and-leasebacks in Eastern Europe: Colliers

Sale-and-leaseback transactions account for only 4.5% of all reported investment transactions in Eastern Europe since 2007, less than half the average for the rest of Europe which is put at 10%, according to research from Colliers International.

However, the potential scope for SLB activity in the region is enormous, the adviser claims in a report entitled 'market for sale and leasebacks'. Citing a research study produced by Hordijk & Ahlqvist in 2004, the adviser points out that corporate entities hold roughly 83% of the commercial property market in Europe. 'The scope for sale-and-leaseback activity is significant, especially given changes in the long held view that real estate should remain in corporate hands as a cultural norm.'

The report concludes that a combination of restricted credit, weak economic growth and a tight debt market makes SLB an interesting transaction medium at the present juncture of financial, economic and property market cycles. ‘If current market conditions persist, and we suspect they will, this could be a growing source of capital raising and investment deals over the short and medium term,’ noted Damian Harrington, Regional Director of Research for Colliers International.

The industrial/logistics sector has been by far the busiest sector in the region, conducting close to 35% of all SLB transactions, but Harrington pointed out that SLB transactions need not just be associated with the main commercial property sectors. ‘Our analysis of historic SLB transaction activity shows that they can be conducted across a variety of sectors. It is a relatively liquid sub-sector in its own right with high profile players active in the market.’

In terms of location, the majority of reported deals have been conducted in the Czech Republic which comprises over 27% of all activity, followed by Hungary and Poland with 17% each. Collectively these three countries account for 63% of the SLB market. Meanwhile Russia and Romania account for just over 25 % of the market combined.

Tony Pinnell, director of property finance for Colliers International Poland, argues that SLBs benefit both sides in the transaction. ‘From an occupier perspective, the major benefits are that the corporate occupier maintains control over the day-to-day management and planning of the business. From an investor perspective, a strong vendor covenant will allow an investor to secure more favourable capital financing terms, especially if a vendor can opt to agree to 10 year terms or longer.’