SPECIAL ADVERTISING SECTION: SALE/LEASEBACK TRANSACTIONS

et’s look at some basic facts inherent in today’s corporate society: debt reduction is always a priority; property does not create revenue; and, owning property does not necessarily maximize assets. So, what’s the most efficient way to address all of these facts, while still focusing on a company’s core competencies? Many would say the answer is entering into a sale/leaseback agreement with a capital partner. Simply stated, sale/leaseback transactions convert real estate into cash, which can then be used to pay down debt or to expand.

   Here’s a closer examination of what some of today’s big names in the sale/leaseback

Jojo Yap, chief investment officer of First Industrial Realty Trust, Chicago, Ill.

arena are experiencing and offering to sellers.

   “The corporate side of our business – which is comprised of acquisition, redevelopment, build-to-suit and sale/leaseback – is our fastest growing segment,” explains Jojo Yap, chief investment officer of First Industrial Realty Trust, Inc. in Chicago, Ill. “Many companies come to us because they seek an operational solution or a financial solution – or both. On the operational side, companies are looking to better serve their customers by reconfiguring their supply chains to increase the efficiency of their distribution patterns. On the financial side, companies with growth opportunities may want to unlock capital from their real estate to invest more in their businesses. So, from both an operational and a financial perspective, the capital from the sale of real estate can meet all of a company’s needs.”

   Rockwell Automation, Inc. – a leading global provider of industrial power, control, and information solutions – certainly comprehends the advantages of sale/leasebacks, as it recently was involved in a transaction with First Industrial that included 24 properties in 24 markets, with lease terms ranging from five to 15 years. First Industrial purchased the properties from Rockwell Automation for $152 million, acquiring and leasing back the 24 properties totaling 3.8 million square feet. The portfolio consists of warehouse, manufacturing and R&D facilities located in key markets in the U.S. and Canada.

   “Rockwell Automation chose the sale/leaseback because it allowed them to monetize the untapped value of their real estate and maximize proceeds,” notes Bob Micera, senior vice president and national head of net lease investments for First Industrial in New York City. “Rockwell was also seeking optimum operations flexibility, given the range of lease terms they sought. First Industrial offers a distinct advantage, not only because of competitive pricing, but also because of our willingness to purchase both long- and short-term leases, as well as surplus assets. Rockwell had to work only with one buyer who had the capability in capital and market expertise to provide a complete solution.”

   Micera also says that the First Industrial pipeline is strong, and that he continues to see an increase in sale/leaseback opportunities as more companies consider the use of their unoccupied real estate as an asset monetization tool.

   Another advantage of sale/leasebacks, according to Micera, is that they allow companies to convert their bricks and mortar into cash to create working capital to pay down debt, buy back shares and reinvest into their businesses.

   “By removing non-earning assets from a balance sheet, a

Robert Micera, senior vice president and national head of net lease investments for First Industrial, New York City.

company could potentially increase their return on assets by selling and leasing back their real estate,” Micera explains.

   One of the competitive advantages of First Industrial is its ability to offer “one-stop shopping” for customers seeking a real estate partner with broad capabilities.

   Yap explains: “At First Industrial, we can complete transactions with no minimum or maximum size limitations. We respond quickly given that we are in 28 markets and have unparalleled market expertise. And, we buy all industrial types from manufacturing to bulk/regional distribution to flex to R&D. We are also a developer with the ability to offer a build-to-suit solution for a corporation.”

   To further expand its capacity to serve corporate America’s industrial real estate needs with increased net lease investment capacity, First Industrial formed a new net lease co-investment program in March 2006 with co-investment partner UBS Wealth Management-North American Property Fund Limited, a fund managed and advised on behalf of the international clients of UBS AG, a world-wide financial institution.

   “The program targets long-term single tenant net leased industrial properties throughout the U.S. with lease terms of seven years or longer,” explains Yap. “The program’s total capitalization could reach approximately $900 million.”