'Sale-and-leaseback trend to continue in Europe'

Sale-and-leaseback deals are no longer confined to the UK and the US, they are also increasingly finding favour in Europe, claims Adolfo Ramírez-Escudero, capital markets executive director at CB Richard Ellis. Ramírez-Escudero was involved as advisor in the recent sale of Banco Santander’s EUR 1.9 bn headquarters to UK-based Propinvest which represents one of the biggest deals in Spain and one of the largest portfolio sales in Europe over the last two years. 'This is an example of how corporates can continue to grow their business in the current market,' he told PropertyEU in an interview this week.
´There’s a growing trend among corporates, especially in the financial sector, to look for ways of releasing new capital. The successful disposal of the portfolio shows that carefully structured sale-and- lease back deals can provide a solution for corporates looking to recapitalise. This means of disposal also creates a more efficient use of equity.´
The vehicle offers very attractive benefits for purchasers as well, he says. ´Essentially this kind of structuring facilitates two types of deal: the actual real estate and the financial deal which is comparable to a fixed rent. Over the long term you have exposure to the real estate gain and you also have hedging against inflation through the yearly recovery of the CPI, which is a little bit different in Spain compared to the UK due to the long leases.'

Ramírez-Escudero is the first to admit that Banco Santander was 'brave' to organise the disposal in the current market, but adds that this led to a step-by-step approach to spinning off the assets and ultimately yielded a better result. The bank had initially valued the real-estate assets to be sold at EUR 4 bn. However, following last week’s sale, the total amount comes to EUR 4.4 bn, resulting in a total capital gain of EUR 1.68 bn.

The deal was structured during the middle of the financial troubles and the strategy before the summer was to sell the entire portfolio. Ramírez-Escudero: 'It was felt that it would be difficult to find one buyer or even a consortium of buyers and that there might be concerns over financing. So we adapted to the market situation by dividing the lots in order to optimise price.'

Ramírez-Escudero believes the disposal also shows that it is impossibly to generalise about the market anymore. 'This shows that there is a lot of interest in the market for this type of deal. We saw a lot of demand for all the lots throughout the process and competitive tensions ensured that pricing negotiations were not so much of an issue.'

The deal also indicates how global the market has become, he adds. 'Five or ten years ago you wouldn’t have imagined this type of deal in Spain and yet it has happened, under the most challenging circumstances. This shows that capital will come from all anywhere in the world for this kind of deal.´