Sale-and-lease back: new liquidity in times of crisis

Unternehmensimmobilie DIR


Sale-and-lease back: new liquidity in times of crisis

Liquidity bottlenecks can threaten the existence of a company. So why not sell and lease your own corporate real estate? The guest article by Deutsche Industrie REIT-AG shows that sale-and-lease-back is a financing model that is noticeably gaining in importance, especially in times of crisis.


By Natalie Treuter, Deutsche Industrie REIT-AG

The financial situation of many SMEs is increasingly deteriorating due to the ongoing pandemic situation and its economic consequences. The existing challenges are already great: necessary investments in digitalisation projects, research and development, company acquisitions or even restructuring - many are caused by globalisation and digitalisation. In addition, the crisis has now triggered disruptions in the global supply chain and increased order slumps. As a consequence, liquidity bottlenecks can arise for companies, which in some cases threaten their very existence.

Sale-and-lease-back of the company property(ies) represents an interesting solution model here. The aim here is to draw capital from the company's own commercial properties and thus generate new liquidity. Here, a company sells its property(ies) and rents them back at the same time, allowing normal business operations to continue without interruption. Since liquidity is generated from the company's own fixed assets in this approach, there is no need to borrow. Unlike most bank loans, there is no need for complex ratings or additional collateral. The only liability is the accruing building rents. Sale-and-lease-back is therefore an alternative financing approach that can help companies to continue their crisis-related challenging operational business and avert a possible insolvency.

As many entrepreneurs are looking for alternative financing options due to the aforementioned challenges, the number of sale-and-leaseback transactions is increasing. According to Deutsche Industrie REIT-AG, an investment company specialising in light industrial real estate with a portfolio value of around €630 million, sale-and-leaseback transactions accounted for more than 30% of the total supply volume in the last financial year, a significant increase on the previous year. An upward trend in sale-and-lease-back transactions was already evident on the market in the last one to two years. According to Sonja Petersen, Chief Investment Officer of Deutsche Industrie REIT-AG, this development is now being further accelerated by the crisis. A steady increase in corresponding transactions on the light industrial market is therefore also expected in the future. Deutsche Industrie REIT-AG expects sale-and-lease-back transactions to account for 15% of total portfolio growth in the current financial year.  

Contact: Natalie Treuter, Investment Analyst at Deutsche Industrie REIT-AG, nt [at], Phone: 0331-740 076 540