YRC’s $122M Deal Bucks Slowing Sale-Leaseback Trend

Sale-leaseback transactions, a popular way for a company with its own real estate to get a quick cash infusion while staying put in its digs, have been on the downswing for the last several months, but one wouldn’t know it looking at YRC Worldwide’s latest activities. The Overland Park, Kans.-based transportation service provider just signed sale and financing leaseback deals valued at $122 million with Richmond, Va.’s Estes Express Lines, only two months after having entered into a $150 million sale-leaseback agreement with NATMI Truck Terminals L.L.C. The transaction with Estes involves a group of YRC industrial facilities located across the United States. As per the contract, YRC will lease back the properties for an initial 10-year term, after which the company will have two 10-year renewal options. Initial lease payments will total $11 million annually. The closings of the deals are expected to take place from March through June. More sale-leaseback agreements are on the horizon for YRC, which has $1 billion in assets. “We anticipate further sales of excess properties, due to the integration of our national companies Yellow and Roadway, as well as sale and financing leaseback deals,” a YRC Worldwide spokesperson told CPN. “We have seen strong interest in our real estate portfolio, which is quite remarkable in the current economic climate.” Indeed, YRC’s brisk sale-leaseback activity belies the market. Global commercial real estate research and consulting firm Real Capital Analytics has concluded that sale-leaseback transactions slid 51 percent from 2007 to 2008. Numbers for the final three months of last year tell an even more drastic story; transactions plummeted 86 percent from fourth quarter 2007 to fourth quarter 2008. Deals valued in excess of $2.5 million dropped from a total $15 billion in 2007 to a modest $7.3 billion last year. The challenge of securing financing is to blame for the downward spiral. As of late, most sale-leaseback deals have involved industrial properties. Recent transactions include Inland Real Estate Acquisitions Inc.’s $59 million deal with The Home Depot for two distribution facilities, and AG Net Lease’s purchase of five Consolidated Container Co. manufacturing and distribution properties for $34.3 million.