Tesco recently announced that they would step up moves to sell and lease back some of their stores. In the property world, having Tesco as a tenant is considered a very good bet. For that reason, in an area of very high property prices, Tesco have realised that if they sell their store sites, or take the store back under a Lease at market rent, they can get top dollar, and can easily live with the annual rent payable.
This strategy need not be limited however to the Tescos of this world. With low yields (the percentage return by way of rent on an outlay to buy the freehold of a property) there is no reason why many businesses should not explore the sale and leaseback of well situated premises.
Take an example of a well established and thriving business operating from its long owned premises, which has a conservative book value. Similar properties might well be fetching considerably more than that on the market. The trader may be tempted to sell the property and built/relocate on a new site out of town. If the original premises is in a good and modern condition, and the location still suits the trader’s business, the trader might be well served by selling its freehold interest in the premises but remaining in occupation under a Lease at a rent that it can afford. The trader (or its shareholders) may have better use for the cash injection from the sale than allowing the value to be confined to the balance sheet.
Here at Ronan Daly Jermyn, we have the expertise and experience needed to advise you on business property transactions, of whatever complexity.
