1. Sale-and-leaseback in the Netherlands Aart Hordijk ERES Conference 27- 06-2009 1

2. Introduction Sale-and-leaseback: Arrangement in which one party sells a property to a buyer and the buyer immediately leases the property back to the seller Goal: Find out how market conform rents are in sale-and-leaseback transactions in The Netherlands 2

3. Introduction Motivations sale-and-leaseback transactions: Liquidize the capital value of the property Business plan / management consideration Potential high book profits (timing decision) The liability for fluctuations in the value of the property can fall due (since 2005 on the Profit-and-Loss account according to the IAS) 3

4. Data The initial number of transactions was 317, but after critically analyzing the list 42 transactions should be removed SectorNumber of transactions Office137 Industrial100 Retail15 Unknown23 Total275 4

5. Data Number of transactions per sector (including total floor space) YearOfficeIndustrial ≤ 20008 (109,500 m2)0 200111 (100,176 m2)0 20024 (53,052 m2)1 (6,610 m2) 20039 (174,341 m2)8 (103,516 m2) 20049 (84,717 m2)20 (291,656 m2) 200525 (363,596 m2)7 (58,383 m2) 200622 (285,585 m2)21 (331,917 m2) 200738 (111,589 m2)25 (304,610 m2) 20088 (32,680 m2)18 (211,614 m2) 5

6. Data When known, per sector is given: Where the floor space is known for almost all transactions, there is much less transparency about the rental and purchase prices and the yields Floor space Rental price Purchase price Gross initial yield Landlord and tenant Seller and buyer 6

7. Data The yield can be calculated (when not known) given the following formula: (floor space x rent) / purchase price When three of the four variables are known, the other can be calculated 7

8. Data Rents from the data are checked by comparing them with market rents from: ROZ/IPD Key Centers Report 1995 – 2008 DTZ publications (Figures in Perspective) Dynamis office publication 8

9. Results Determining the purchase price based on the formula is in theory possible, but due to the large spread in time, rental price, and yield that is too rough. 3 – 3,5 billion euro total investment value estimated 9

10. Results 10

11. Results 11

12. Results 66% of the transactions include a higher rent than the market rent Difference bigger for the industrial sector than for the office sector For big offices the contract rent is on average 20% higher than the market rent Yield differences are much smaller than the difference in the rents 12

13. Conclusions Much more transparency needed More transparency would lead to better market conformity Length of the contract is important but often missing 13

14. Further research Further research of sale-and-leaseback transactions is strongly encouraged Find more information to increase transparency International research 14

15. Aart Hordijk University of Delft ROZ Netherlands aart.hordijk@roz.nl 15