Building liquidity through
sale & lease back
Selling and leasing back self-occupied company-owned real estate, simultaneously, unlocks capital and creates equity available for investments and growth
Most important reasons for a sale & lease back transaction
Create equity
Especially in times of high real estate valuations the market value of a property is often above its book value. Hidden reserves can be transformed into balance sheet equity.
Unlock liquidity
Unlock liquidity for investment in operations or corporate growth.
Adjust the capital structure
Possibility to optimise the capital structure such as debt amortisation or return of capital to shareholders by means of distributing a dividend.
Improved operational flexibility
Possibility to evaluate stay or go at the end of the lease term. A sale and lease back transaction can be a long-term exit strategy in a win-win-situation with the investor.
Sale and lease back – liquidity when you need it
Raising capital from your company’s property by selling and leasing back individual assets or whole portfolios can be highly beneficial. Monetising your real estate can help:
1. Release of tied up financial resources and realization of hidden reserves.
2. Creation of liquidity and better liquidity ratios.
3. Unlock capital for business operations such as investments or growth.
4. Momentum strategy with currently high property valuations.
5. Early exit scenario before a property becomes a problem in the event of a separation from properties that will be redundant in the future.
We have a wide expert knowledge in structuring, executing and negotiating sale and lease back transactions. We follow a holistic commercial approach by connecting your operational and financial targets.
Sale & Lease Back – Why and how ?
Selling a property and simultaneously leasing it back – a conversation with Lars Frölich
Everything you need to know about financial and operationsal benefits from a sale and lease back transaction, how the rent is defined and resulting rights and obligations.
Our track record
108
108 successful transactions in Switzerland with a total of >225 properties
29
Thereof, 29 are executed sale and lease back transactions in Switzerland with >50 properties in sum
CHF 11.5 billion
The grand total of all Swiss transactions is > CHF 11.5 billion.
Thereof, > CHF 4.6 billion are executed sale & lease back transactions
Innovation
We have been the first ones to institutionalise the reverse auction to optimise the ratio of rent and purchase price
Digital
Leading digital tools to execute a transaction most convenient for investors as online as possible and to maximise multimedia use for more emotions
Global and local
JLL Switzerland combines the advantages of a customer-oriented national organization with the strength and professionalism of a global company
Insights
Selling and leasing back a property creates several conflicts. An overview of the most important tensions in which JLL comprehensively advises you:
Maximizing the transaction’s gain vs. lower rent and higher profitability in the future
Tension:
The classic one among the conflicts, commonly known as the management generation conflict. It’s the question about today’s transaction gain or tomorrow’s corporate gain.
Capital market’s view:
On the one hand market and contractual rents are compared. On the other hand affordability and default risk of the tenant are analysed. A possible auction process variation is a tactical combination of maximizing the sales price and simultaneously minimizing the rent.
Operating flexibility by means of a short lease back term vs. maximising the sales price through a long-term lease back
Tension:
From an operating flexibility point of view, the lease back term should be kept as short as possible with the most possible number of short-term extension options. In order to maximize the property’s sales price the lease back term should be as long as possible to create long-term income stability.
Capital market’s view:
The property’s characteristics for alternative uses, such as location, usage and flexibility are decisive for the expected income stability and tenant dependency.
Full operational control and flexibility vs. low maintenance obligations
Tension:
Interfaces and the list of responsibilities according to the lease agreement define control and flexibility. A typical base rule is “operations first” meaning that the lease agreement should provide the highest possible flexibility within the property to the tenant. However, this comes along with seller-tenant’s obligations to maintain the property, too.
Capital market’s view:
Typically, there is information asymmetry about the property’s building conditions. Allocating future maintenance obligations at the seller-tenant can prevail unnecessary risk premia by the buyer. Such structuring also makes a real estate investment passive, which is often a investment characteristic strived for.
Good to know
Selling and leasing back a property with reduced alternative uses is rather corporate financing. Thus, real estate investors treat the transaction as such and the seller-tenant is analysed accordingly.
Criteria to determine the alternative use are location and degree of specification for the user and usage.
The higher the degree of specification of a property the lower the alternative use possibilities, the longer is the required minimum lease term.
Selected track record
Global headquarters of Bank Pictet
Banque Pictet & Cie sold and simultaneously entered in a long-term lease back of its prestigious global headquarters in the prospering Acacias district of Geneva.
Banking regulations have made holding real estate on the balance sheet of financial institutions prohibitive due to capital and liquidity requirements. This sale and lease back will allow Pictet to self-finance its new development.
JLL was exclusively mandated to advise, structure and execute the transaction, including the final negotiation phase until successful signing and closing in a holistic corporate finance approach.
Purchaser: internal joint-venture-structure of Deka Immobilien
Sale of the Kubus property in Wetzikon (ZH) by Reichle Immobilien
JLL Switzerland successfully advised Reichle Immobilien in the sale of the Kubus property. The building is used as global headquarters of the seller’s sister company Reichle & De-Massari (R&M) and has been rented back in a long-term lease agreement.
R&M is a Swiss family enterprise and since 1964 a global leader in cabling solutions for high-end communication networks.
JLL was exclusively mandated to advise the seller and the entrepreneurial family. Thereby JLL structured and executed the transaction, including the final negotiation phase until successful signing and closing in a holistic approach by means of combining the strategic interest of both business units real estate and R&M.
Purchaser: quoted real estate company
Credit Suisse has sold a unique office property by Geneva’s main station
JLL was assigned by Credit Suisse to execute a sales transaction with a partial lease back of an office building directly by the main station in Geneva.
The building was originally constructed and used as Credit Suisse’s regional head-quarters. However, part of the building was let to third party tenants just before the transaction kick-off.
The key challenge of the transaction was the creation of a reliable investment case including the quantification of business potentials. The transaction further contained additional complexities resulting from the partial lease back of different space types by the seller.
Purchaser: real estate fund
Sale of the manufacturing site of Gebrüder Loepfe in Wetzikon (ZH)
JLL successfully sold the headquarters and manufacturing site of Gebrüder Loepfe AG within approx. 7 weeks in an accelerated sale-and-leaseback transaction.
Gebrüder Loepfe AG is a global market leader for high-quality textile control systems with a market share of approx. 50%.
The main challenge of the mandate was the strict timing requirement of Loepfe to close the transaction, particularly in combination with the reduced liquidity due to the usage of the property.
Purchaser: real estate fund
Sale of the cityscape-defining Haus zur Werdmühle in Zurich
JLL was assigned by Credit Suisse to sell a commercial, owner-occupied property in the city center of Zurich with a simultaneous lease back.
The property is used for retail banking with a representative private customer area on the ground floor and high-quality office space on the upper floors. In addition, there are two separately accessible retail and gastronomy areas.
The biggest challenge of the transaction was the time frame of only three months set by Credit Suisse within which the deal must be prepared and completed.
Purchaser: life insurance
Sale of the mixed-use commercial centre Linth-Park incl. the national distribution center and headquarters of Vögele Shoes
JLL was exclusively mandated by Karl Vögele AG (“Vögele Shoes”) to sell the regional mixed-use commercial centre. This includes the building parts which are used as office, warehouse and for logistics.
Simultaneously, the seller of the property entered into a long-term leaseback agreement for the office, warehousing and logistics spaces which serve as national headquarters of Vögele Shoes.
JLL Switzerland advised the seller and the selling entepreneurial family holistically in order to achive the best possible opernational and financial transaction results. Capital was unlocked and made available for investment and focus on the core business.
Purchaser: private
Sale of two campus portfolios in a “sale-and-lease-back-structure”
JLL has fully advised Colony Northstar, a US listed private equity firm, in its successful placement of two sale and leaseback campus portfolios as a dual share deal structure, including optimization of deferred taxes and early repayment fees for debt.
The tenants of all properties are the two international hotel management schools Glion and Les Roches with triple-net rental agreements in US American style “sale and lease back structuring”.
In addition to the complex transaction structure, the tight schedule and the global approach to investors in cooperation with other JLL countries and continental units were particularly challenging.
Purchaser: investment foundation of pension funds
