Industrial Sale-Leasebacks Outnumber Retail, Office

Sale-leaseback deal volume got off to a slow start in January, not a surprising development in light of the generally sluggish investment sales market. According to Real Capital Analytics Inc., sale-leaseback deals totaled only $183 million for the month. That figure represents only a fraction of the volume tallied for January 2008, when Real Capital Analytics tallied $790 million.In the biggest sale-leaseback deal reported so far this year, Gilead Sciences Inc. disclosed last Thursday that it had completed the $137.5 million acquisition of a 163,000-square-foot office building and 30 adjacent acres in Foster City, Calif. The transaction, a partial sale-leaseback, also provides significant room for growth to the buyer, a pharmaceutical development company, as it includes entitlements for 540,000 square feet of additional development.Although Gilead’s purchase is in the office sector, industrial properties are outnumbering other property sectors in sale-leaseback transactions. Since the beginning of the fourth quarter last year, 25 industrial sale-leaseback deals have closed. Another 16 office deals have closed or come under contract, and the retail sector lags far behind, mustering only three deals since Oct. 1. Although the small sample makes conclusions difficult to draw, the apparent popularity of industrial properties may reflect the sense among buyers that the sector may outperform the office and retail sectors.The trend continues to follow the pattern set in the past several years. Of 103 sale-leasebacks recorded during the fourth quarter of 2007, for example, the largest number of deals, 44, involved industrial assets. Office assets traded in 38 deals, retail properties changed ownership in 19 transactions and a pair of development properties rounded out the list.Some investors are finding opportunity in the efforts of owners in struggling industries to turn their assets into cash. In late January, Inland Real Estate Acquisitions Inc. said it had wrapped a $59 million sale-leaseback deal with The Home Depot Inc. for distribution centers in Birmingham, Ala., and Valdosta, Ga. In a statement, Inland acquisitions coordinator Mark Cosenza cited the facilities’ central role in Home Depot’s supply chain. Inland also liked the recent vintage of the two 637,000-square-foot facilities, which were both completed last year.