US specialist in corporate sale leasebacks, WP Carey, is investing in a portfolio of 26 properties leased to a funeral services operator.
All the assets are leased to Mémora Servicios Funerarios on a triple-net basis with a 30 year master lease.
Explaining the background to the tenant, WP Carey said to Mémora Servicios Funerarios was established in 1997, growing to become the largest funeral services provider in Spain and Portugal, employing approximately 1,500 people and operating 131 funeral parlours and crematories, 16 cemeteries and 42 offices across the region.
The transaction is an example of how some companies wish to use their physical assets to boost their underlying expansion plans.
Sometimes, sale leaseback deals are assumed to signpost distress as in a corporate entity needing funds quickly when limited alternative options exist.
But in an interview last year, Christopher Mertlitz, head of European investments, said it was certainly not the strategy of WP Carey to seek out deals with corporates other than with a strong underlying business and balance sheet.
While he agreed companies need liquidity, he argued sale and leasebacks should not be regarded as a ‘measure of last resort’. ‘A quick capital injection is bad when the underlying business model is not good. Yes, in a way we are seeing improved landscape for sale and leasebacks and a desire by corporates to look at the balance sheet, but there is no point in signing a 20 or 25-year lease if you think there is a doubt they will make it over the next six months. The credit risk in a deal is substantial.’
Since then, the company has announced numerous deals. In January, it revealed an €84mln transaction in the Netherlands, a €22 mln deal in the Czech Republic, seven DIY stores in Poland, a €41mln deal with a Danish grocery chain, and a logistics unit in the UK with car manufacturer, Jaguar, among others.
In this Spanish transaction, Juan Jesús Domingo, CEO of Mémora, said: ‘Today’s announcement marks the start of a long-term, strategic partnership to help accelerate the growth and expansion of the Mémora Group as we continue to execute on our plans to open new facilities over the next decade.’
He added, ‘Our long-term commitment to this portfolio of strategically located assets and the stability of our company in the Iberian markets positioned us well to partner with WP Carey on this real estate transaction and lock in a long-term lease.’
Mertlitz said: ’Mémora’s strong market position, coupled with the criticality of these assets and long lease term, made this transaction ideally suited for our investment criteria while also adding to the diversity of our European portfolio.’
CBRE advised the seller.
