Chapter 3
Unlocking Trapped Capital
10 High-Impact Moves to Reduce Total Cost of Occupancy
5 Minute Read
Explore sale-leaseback structures and initiatives that reduce operating expenses, improve cash flow and strengthen the balance sheet.
Company-owned buildings may become a liability as they age due to operational inefficiencies and outdated design features and amenities that are non-conducive to attracting talent. Renewable energy likely will also play a prominent role to meet ESG imperatives.
In such cases, corporate real estate leaders should consider monetizing these assets through phased exits and sale-leaseback arrangements that transfer the risk of vacant space, future capital requirements, functional obsolescence and deferred maintenance to real estate investors. This can generate income that can either drop to the bottom line or be reinvested in the core business.
Sale-leasebacks allow occupiers to unlock trapped capital and deliver substantial proceeds to the company for reinvestment in the core business.
How to Begin?
- Understand your portfolio strategy across properties and markets. Determine which assets are not as critical for long-term ownership, including headquarters and operational hubs.
- Know your net book value and appetite to deal with any write-offs over the next 24 months. This often must be coordinated with a broader view of business performance.
- The opportunity to capitalize on really attractive investment assets, coupled with underperforming assets or locations, can unlock more value through a portfolio lens.
Why Now?
Although investor demand for office assets has tempered and debt markets are challenged, certain credit-tenant offices, as well as data centers and industrial & logistics facilities, can secure financing and unlock substantial proceeds to redeploy to other corporate priorities.
High-Impact Examples:
- A retail pharmacy corporation engaged CBRE to formulate a programmatic sale-leaseback strategy, allowing the client to generate a quarterly gain over net book value that could be reported as ordinary income.
- Over the past 11 quarters, CBRE has executed 14 portfolio transactions for the client with total proceeds of more than $2.6 billion and a blended cap rate of 5.96%.
- CBRE’s client has recorded a gain over net book value in each quarter that has been reported as ordinary income on its quarterly earnings.
Explore all 10 High-Impact Moves to Reduce TCO
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