TULSA, OKLAHOMA (February 24, 2023) – Jeff Tracy, senior vice president of Northmarq’s Tulsa office, was featured in Wealth Management Magazine’s recent story, “Higher Interest Rates Fuel Sale-Leaseback Activity.” The article highlights that despite higher interest rates dampening transactions in the broader commercial real estate investment sales market, they have had the opposite effect in the sale-leaseback sector, with the market on pace for a record-high year.
Although the sale-leaseback activity slowed in the fourth quarter as buyers and sellers tried to figure out new pricing amid higher interest rates, the sector has continued to generate solid activity, according to Tracy. “What we have seen, historically, is that the sale-leaseback category tends to bounce back the quickest and isn’t as sensitive to interest rate impacts,” he said.
Even on deals where cap rates may have increased from a 6 percent to 8 percent, it is still better than the financing rates some of these middle market companies can get on their business in the current market, notes Tracy. “That’s why you’re really seeing this pick up steam, because people realize the value to sale-leasebacks and that it is a nice alternative to traditional financing,” he said.
Another aspect to the sale-leaseback story is that some businesses are still coming out of the pandemic and are looking for capital to aid in their recovery. “If you think about what’s happened over the last three to four years, it’s really been pretty traumatic from a perspective of upending businesses,” said Tracy. Starting in mid-2022, there was fundamental recovery even in some of the more severely impacted businesses. Businesses that took on significantly more leverage during the pandemic are now looking to clean up those balance sheets, and a sale-leaseback is an attractive way to do that, he adds.
Topics in the story include:
- Business owners hungry for capital
- Plenty of investor interest
- Looking ahead in 2023