By W. P. Carey, a leading provider of sale-leaseback financing
Sale-leaseback financing — a differentiator in a competitive deal-making environment
PitchBook figures indicate that $872 billion in dry powder was available at the end of September 2016, taking into account the fund reporting cycle lag. Since then, $163.4 billion has been raised, indicating more than $1 trillion available for investment as of June 2017.
With a record amount of capital chasing new deals, PE portfolio companies with valuable operating assets can access an untapped source of long-term capital through sale-leasebacks to enhance returns on existing investments and increase their sponsors’ competitive profile for new acquisitions. Finding the right source and structuring the deal to meet the specific needs of all parties are the keys to sale-leaseback financing success for PE firms and their portfolio companies.
Institutional investors, particularly those with a history of working with PE firms, have the resources and skills to independently evaluate the real estate holdings of private companies, thereby maximizing value and proceeds and delivering competitive pricing for critical operating assets.
Timing and certainty of close are as important and in many cases even more important than pricing. Again, history of the investor in the PE space and a history of structuring deals that meet the specific transactional and operating requirements of PE firms and their portfolio companies are essential to a successful sale-leaseback financing.
Alignment of Interests
Critical operating assets are long-term assets and the best buyer is a long-term buyer. The purchaser is essentially a long-term financial partner of the PE portfolio company, and simultaneously serves as its landlord. Consequently the buyer’s long-term investment history, reputation, and management capabilities must be understood.
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This article represents the author's views only and doesn't necessarily represent the views of PitchBook.