Weekly Newsletter Nov 16, 2020
Last September, we helped one of our clients sign a sale-leaseback transaction involving the Kibbutz Ginegar factory. Looking back on that deal is a good opportunity to discuss Net Lease deals:
Net lease is named for the structure of the transaction - the eventual tenant that before the transaction was the owner of a property, sells the property and simultaneously rents it back and pays all the expenses related to the property, including rent with minimal intervention by its new owners. Usually it leased to one customer for a long-term contract. The investment return is dependent on the location of the property and risk associated with the transaction.
Net Lease is a product that gives the (new) owner of the property stabilized cash flow and he avoids having to deal with operations, and, on the other side, it provides the tenant with broad latitude on how it wants to operate within the property. In fact, the (new) owner of the property collects the rental income, while the responsibility for all the operating expenses is the responsibility of the tenant.
In 2012, sale-leasebacks accounted for about 2-3% of the volume of global REIT transactions, while today it has climbed to about nine percent - Why is this deal structure so popular?
• Source for capital: the sale provides immediate cash, which was previously “illiquid” capital tied up in ownership of the asset, which can now be redeployed to other investments.
• Lightens the balance sheet.
• Makes funds available for debt repayment.
• Allows investment in expanding the company’s core business.
• The tenant treats the property as if still the owner, without needing approval for changes to the building.
The scope of global net leasing transactions is expected to increase in the coming years, mainly in the sector of supply chain and logistics. Health of the office sector is dependent on the manner and speed of employees returning to the office after COVID.
So, is Net Lease a real estate product or a financial product? In our opinion, a real estate product with a minimum real estate involvement or headache!
With Avison Young, a private firm focused on the success of their clients as partners, you get a group of dedicated professionals who want to invest in your success!
Israeli commercial real estate deals
- CHECK POINT'S real estate revolution is getting underway (Calcalist).
- BROWN HOTELS pivot to longer term rentals (Globes).
- MEGA OR Ltd wins contest for DISCOUNT INVESTMENT Ltd (Globes).
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Commercial Real Estate Opportunities
- For sale 2,200M2 commercial building in Petah Tikva, in the center of Israel.
- For sale two floors (2,300M2) out of five, in a commercial building in the center of Tel Aviv.
- For Sale in Tel Aviv 600M2 floor, (one out of 4) + 13 parking spaces.
- For lease, in Holon, 1,500M2 office space ready to occupy
- For lease, in Alon Tower Tel Aviv 156M2 office space, high floor 5 rooms.
- For lease, in Or Yehuda, 600M2 office space ready to occupy.
- For lease, in in Petah Tikva 1,700M2 office space ready to occupy.
- For lease, in Kadima, commercial units in a new neighborhood commercial center.
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