Sale Leaseback Volumes Break Record
Highly Attractive Relative Cost of Capital Drives Deal Volume
2023 Outlook Indicates Trend Will Continue
Corporations and Private Equity Investors Take Notice
NEW YORK, March 17, 2023 /PRNewswire/ -- Total U.S. sale leaseback volume of 874 unique transactions during 2022 exceeded the prior record volume of 789 in 2021 according to SLB Capital Advisors, an advisory firm focused on sale leasebacks and M&A-related real estate transactions.
Sale leaseback transaction count for 2022 was 11% greater than prior highs reached in 2019 and 2021. Total dollar volume of $31.4 billion also set a record, besting the 2019 volume of $27.6 billion by 14%.
"Robust 2022 dealmaking was driven by multiple factors including the prior year's record M&A activity, buyers' strong appetite to deploy capital, and the sale leaseback's attractive cost compared to other forms of capital," according to Scott Merkle, Managing Partner of SLB. Merkle noted that while rates on high yield bonds and corporate debt have risen >400 bps, in contrast, increases in the cost of sale leaseback transactions (as measured by cap rates) were more muted, widening approximately 100-150 basis points.
"In addition, the sale leaseback market offered investors and issuers better stability than conventional debt and equity financing. Debt and equity markets were much more volatile, with the issuance window opening and closing several times during the year." By contrast, he said, while buyers became more cautious, the sale leaseback market remained open the entire year with a large and diverse number of investors in the market.
SLB Partner Matt Wrobleski commented "The key sale leaseback theme early in 2023 is that relative to other forms of corporate funding, sale leasebacks are even more attractive from a cost of capital standpoint."
Further, Wrobleski said sale leasebacks are poised to play a larger role in private equity and corporate capital allocation in 2023. "Private equity investors have long recognized the multiple arbitrage and the positive impact of a sale leaseback in the buyout capital stack." However, he added, "With the sale leaseback not only below the weighted average cost of capital, but in many cases below the cost of debt, both corporations and private equity investors will come to rely on sale leasebacks as an even more critical arrow in their quiver."
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SOURCE SLB Capital Advisors