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Sale-Leaseback Volumes Up 190% YOY


Sale-leaseback volume has ballooned by 190% over Q1 2021, the strongest Q1 on record, according to a Q1 report from SLB Capital Advisors. SLB attributes this to several factors, with an overflow of deals from 2021 being a primary driver. 

Sale-leasebacks plummeted in 2020 but surged in popularity in mid-2021. Q1 2022's $8.4B in leaseback deals was above Q4 '21 but below Q3, when $9.5B was transacted. Two large acquisitions accounted for a large portion of Q1 2022's volume: VICI’s purchase of the Venetian Resort, Expo and Convention Center for $4B and GLPI’s $674M acquisition of two Cordish Companies Live! Properties.

The industrial segment also continued to see strong activity and accounted for 45% of all transactions in Q1 of this year. This was in keeping with 2021, when 48% of Q1 sale-leasebacks were industrial deals. The healthcare sector also saw a significant leaseback deal, Ventas’ acquisition of 18 Arden Health Services properties for $204M.

There may be a dip in SLB's next report; the company said the environment for sale-leasebacks has become more cautious.

Because of that buyer cautiousness, cap rates have begun widening since the end of Q1; SLB revised the average sale-leaseback cap rate upward to 6%-8%. Pricing has still been very favorable, with the general strong pricing trends that occurred in the final quarter of 2021 holding through most of 2022’s Q1. The report said that as cap rates on sale-leasebacks were generally well inside many companies' weighted average costs of capital, the tool will continue to be an attractive option on the corporate financing side.

Regionally speaking, the western portion of the country continues to see the majority of sale-leaseback deals, accounting for 62% of deal volume in Q1. This was followed by 16% in both the South and Northeast regions, with the Midwest seeing only 5% of the deal volume.