Raising Capital from Corporate Real Estate 2021 update - JLL
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Raising Capital from Corporate Real Estate 2021 update
Raising Capital from Corporate Real Estate 2 Raising Capital from Corporate Real Estate 3
Contents Introduction
Introduction 3 2020 was a record year for occupier disposals of owned real estate across a wide range of sectors. In the
EMEA region alone, disposals of corporate and owner-occupied properties raised €27bn across more
Corporate disposals are at record levels 4 than 580 transactions. This report provides a breakdown of disposals by asset types and geographies,
as well as a high-level review of the context for this activity.
What are corporates and owner-occupiers selling? 6
The onset of the COVID-19 pandemic in Spring 2020 precipitated unprecedented falls in economic output and
Which countries have seen the most activity? 10 forced businesses to rapidly respond to an extremely challenging and uncertain operating environment. The
pandemic upended ways of operating that had persisted for decades (if not longer) within many industries,
Unlocking the value of corporate real estate 13 including a sudden shift to remote working for millions of the world’s office workers. The longer-term impact of
the pandemic is likely to be an acceleration of pre-existing trends towards more flexible and digitally-enabled
ways of working, shopping and living.
As the rollout of vaccines begins to offer a route out of the pandemic, many enterprises are reviewing their
real estate portfolios from a new perspective and asking searching questions about how much real estate they
need, how they use and operate it, and where it should be located.
This report demonstrates that disposals of owned properties are both an attractive and viable route to raising
capital, and can also provide occupiers with considerable operational flexibility. We continue to see a growing
appetite from investors for partnering with corporates and owner-occupiers to monetise all type of property,
including specialist manufacturing facilities, research buildings and data centres.
An increasing number of corporates are also collaborating with investors to forward fund new headquarters
and other facilities, which provide the adaptable and highly sustainable environments that will be more
important after the pandemic ends.
Raising Capital from Corporate Real Estate 4 Raising Capital from Corporate Real Estate 5
Corporate disposals are at record levels What’s driving corporate disposals?
While conditions specific to individual companies and the industries in which they operate are key reasons for sales, the high
Disposals of corporate real estate in EMEA raised a record €27bn in 2020, up slightly volumes of recent activity are also being driven by several wider trends:
from €26.8bn in 2019. The number of disposals remained high, with 588 completed • ectors adversely impacted by the pandemic, such as energy, automotive and aviation were highly active in 2020. Disposals
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throughout 2020.1 Last year was also the third consecutive year in which the total of properties from these sectors represented some of last year’s largest sales.
value of corporate disposals exceeded €20bn. • high number of portfolio transactions, which accounted for around one third of the value of all disposals in 2020.
A
Companies with large networks of lower value assets, such as convenience retail, fast food restaurants or logistics centres,
This record-breaking level of disposals is particularly noteworthy given it occurred in spite of the ongoing COVID-19 pandemic. As targeted portfolio sales as a means of raising capital and accelerating growth.
lockdown restrictions led to a sudden downturn in economic activity in the Spring of 2020, many owner-occupiers began drawing
up plans to dispose of properties in order to shore up their finances. The rollout of government support programmes however, • hort term sale and leasebacks were particularly prevalent in 2020 as many occupiers sought to raise capital while they
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partly mitigated this immediate need to raise capital from property sales and made alternative methods of capital raising, such as developed longer-term plans for their property portfolios post COVID-19.
bond issuance, more favourable. Companies were also struggling last year to forecast capital and accommodation requirements
when the short to medium term outlook was so uncertain, which caused many property decisions to be delayed or placed on hold. • isposals of industrial and logistics properties remained highly active, driven in part by retail groups monetising their
D
distribution networks. Logistics properties also featured prominently as companies are more likely to still own these types of
With the economic outlook improving and government measures set to be phased out during 2021, disposals that were temporarily assets.
shelved can be expected to return to the market. We also expect that as corporates reflect on the longer-term changes to their • he life sciences sector and more generally owners of research and development facilities, the profile of which has been
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property requirements arising from the pandemic, they will opt to dispose of under-occupied facilities and explore opportunities enhanced by the pandemic, have shown considerable interest in disposals. Owner occupiers in this sector have benefited
for sale and leasebacks or forward funding for new spaces. This will have a positive impact on levels of activity in 2021. from significant funding, stronger credit profiles and growing investor demand for R&D assets.
Total value of corporate disposals, 2010 - 2020, €bn
25
20
15
10
5
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: JLL, 2021. Excludes sales of
Raising Capital from Corporate Real Estate 6 Raising Capital from Corporate Real Estate 7
What are corporates and owner-occupiers selling? Total Value of corporate disposals by sector, €bn
Offices, retail and industrial properties continued to be the most active sectors for corporate and Offices Industrial and Logistics
10 10
owner-occupier disposals in 2020, accounting for 80% of the total value of disposals in EMEA.
8 8
Offices Elsewhere, Germany’s Deka Immobilien acquired a distribution 6 6
centre from UK retailer B&M for €178m in March. The site, which
Corporate disposals of office properties grew sharply in 2020, 4 4
is located in Bedford, consists of more than 90,000 square metres
with €9.7bn of transactions taking place - compared with €8.9bn
of high specification warehouse and ancillary spaces and was 2 2
in 2019. In one of the largest disposals of the year, French energy
completed in September 2019. B&M will continue to operate
firm ENGIE sold their future global head office in Paris to Swiss
from the site on a long-term leaseback with the new owner.9 0 0
Life Asset Managers for around €1bn. The 135,000 square metre
2 0 1 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 2 0 1 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
office campus comprises six buildings that are currently under
construction in partnership with property developer Nexity,
Retail
The value of corporate disposals of retail properties fell in 2020 Retail Alternatives
with ENGIE set to begin occupying the site from 2023. The 10 10
exemplary development is set to be one of the most sustainable to €4.3bn, compared with €5.2bn in 2019. Large retail groups
of its kind and is targeting BREEAM Excellent, HQE Excellent and remained very active last year, though much of their focus was in 8 8
BiodiverCity certifications.2 disposal of logistics facilities and other non-store assets.
6 6
In January, Finnish financial firm OP Cooperative, part of the OP Disposal of supermarkets were a key driver of activity in the sector
in 2020. Key transactions included Spanish retailer Mercadona 4 4
Financial Group, agreed a sale and leaseback on their Helsinki
office with a consortium of Finnish and South Korean investors. selling a portfolio of supermarkets for €180m to LCN Capital 2 2
The disposal raised €480m for OP Cooperative, who will continue Partners, a specialist investor in sale and leaseback transactions.
operating from the property under a long-term lease agreement.3 The portfolio consists of 27 retail stores that Mercadona have 0 0
agreed to lease for 15 years.10 2 0 1 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 2 0 1 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Norwegian telecoms group Telenor sold their headquarters
in Fornebu to NPRO Holding AS for around €500m in October. UK supermarket Waitrose, part of the John Lewis Partnership,
As part of the deal, Telenor agreed to lease one quarter of the sold a portfolio of six freehold supermarket stores in July to Healthcare Other
10 10
building for 25 years, and a further 15% of the building for Supermarket Income REIT for €82m. Waitrose will continue to
another seven years.4 operate out of the stores on new 20-year leases.11 Around the 8 8
same time, Waitrose separately sold a further five supermarkets
In November, BP sold their head office in London for €277m 6 6
for €70m in a sale-and-leaseback deal to LondonMetric Property.12
to Hong Kong-based Lifestyle International. BP will lease the
building, which is located at St James’s Square, for an additional Elsewhere, Dutch supermarket group Jumbo raised €240m 4 4
two years while it develops alternative plans for its London in October by selling a portfolio of 62 stores to local retail
2 2
staff.5 The energy group is aiming to sell $25bn of assets by 2025, investor Annexum. The portfolio of stores are located across the
around half of which it has already divested or agreed a deal on. Netherlands and are covered by long-term lease agreements 0 0
Only a month before their HQ sale, BP raised €443m through with Jumbo.13 2 0 1 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 2 0 1 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
selling a 49% stake in the land leases of 199 petrol stations, which
they’ll continue to operate from under new 20-year leases.6 Other sectors
Industrial and Logistics
Beyond these sectors, the value of corporate disposals in the Total value of corporate disposal, €bn
alternatives sector rose in 2020, reaching €2.3bn. Data centres
Last year saw the value of disposals in the industrial and logistics were a key driver behind this activity. In one notable data centre 2011 - 2015 2016 - 2020
sector steadily rise to €7.5bn. Furthermore, the total value of disposal, Iron Mountain and AGC Equity Partners agreed to a
industrial and logistics disposals has risen markedly over the €300m forward funding arrangement to develop a new 280,000
Offices
course of the last few years - between 2016 and 2020, more square feet data centre in Frankfurt. Under the terms of the deal,
than €23.9bn was raised through sales of industrial and logistics AGC and Iron Mountain formed a joint venture in which AGC Industrial and
assets, compared to €9.8bn between 2011 and 2015. Notable owns an 80% stake through its injection of capital to develop Logistics
transactions in 2020 included French transport company Jacky the site, which Iron Mountain will manage. The data centre itself
Perrenot selling a portfolio of 50 logistics sites for €210m to a joint has been pre-leased to a US-based Fortune 100 company on a Retail
venture backed by Catella Asset Management and Tristan Capital 10-year lease.14
Healthcare
Partners.7 In the healthcare sector, the value of disposals has risen markedly
In April, UK retailer Next raised €135m through the sale of over the last few years, with €10.0bn of disposals taking place in Alternatives
three logistics warehouses to Aviva Investors. The warehouses the five years up to the end of 2020. More than €2.1bn was raised
comprise more than 110,000 square metres of space and were in 2020 alone, with retirement homes and elderly care being by Other
acquired by Aviva’s Lime Property Fund, a real estate fund far the most active sub-sectors.
0 10 20 30 40 50
targeting long-term, inflation-linked income.8
Source: JLL, 2021. Excludes sales of
Raising Capital from Corporate Real Estate 8 Raising Capital from Corporate Real Estate 9
Key disposals in 2020
January April September November
Finnish financial firm OP UK retailer Next Mercadona, a Spanish BP raise €277m by selling
Cooperative sells their sells three logistics retail group, sells 27 retail their London headquarters to
Helsinki office for €480m warehouses to Aviva supermarkets through a sale Hong Kong-based property
to a South Korean-Finnish for €135m and leaseback to LCN Capital investment company Lifestyle
investment consortium Partners, raising €180m International
March July October December
German investors acquire B&M’s Catella Asset Management Norwegian telecoms ENGIE, a French energy
distribution centre in Bedford for €178m, and Tristan Capital Partners group Telenor sell their company, sells their under-
which the retailer will lease on a long- acquire 50 logistics properties corporate headquarters construction headquarters
term leaseback arrangement from transport company Jacky to Oslo-based NPRO to Swiss Life Asset
Perrenot for €210m Holding AS for €500m Managers for just over €1bn
Raising Capital from Corporate Real Estate 10 Raising Capital from Corporate Real Estate 11
Which countries have seen the most activity? Total value of corporate disposals by country, €bn
United Kingdom Germany
8 8
The UK, Germany and France continued to be most active markets for corporate
disposals in 2020, accounting for 52% of the total value of transactions in EMEA. 6 6
While the UK has seen the most activity over the last decade, Germany was the most active EMEA market in 2020 - both in terms 4 4
of the levels of capital raised, and also in the number of disposals. Across the course of 2020, sales of corporate properties in
Germany raised a record €5.6bn in 122 disposals. While industrial and logistics continued to represent a large share of disposals 2 2
in Germany, healthcare was also highly active. Slightly over half of the total value of corporate disposals in 2020 came from these
two sectors alone.
0 0
The value of disposals in the UK fell in 2020 to €4.4bn, compared with €8.0bn in 2019. This was in part because the UK saw fewer 2010 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 2010 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
of the large portfolio deals in 2020 than it has in recent years.
While activity in France was slightly lower than in 2019, the market remained highly active by the standards of the last decade. France Sweden
8 8
There were 65 disposals in France in 2020, collectively raising €3.9bn. Offices the most active sector, with 30 disposals raising a
total of €2.4bn - though the sale of ENGIE’s headquarters alone represents €1bn of this figure.
6 6
Elsewhere, the value of disposals in the Netherlands hit a record high in 2020, with €1.8bn raised from 45 corporate sales. Italy
also saw a record value of capital raised from corporate disposals last year, with €1.4bn raised across 19 transactions. Activity in
Spain was slightly lower than 2019, with €1.1bn raised from 34 transactions. 4 4
2 2
0 0
2010 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 2010 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Spain Netherlands
8 8
6 6
4 4
2 2
0 0
2010 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 2010 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Italy Norway
8 8
6 6
4 4
2 2
0 0
2010 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 2010 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: JLL, 2021. Excludes sales of
Raising Capital from Corporate Real Estate 12 Raising Capital from Corporate Real Estate 13
Unlocking the value of corporate real estate
Corporates and owner-occupiers looking to unlock the value of their property
portfolios have a range of options available to them, including:
• Sale and leaseback, in which properties are sold to landlords in return for the company taking an occupational lease
• trip income, where an investor pays a lump sum upfront to acquire the rental income derived from a long-term lease, with
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the property reverting to the tenant when the lease expires
• redit tenant leases, which is similar to strip income. Credit tenant leases are sized and priced based on the tenant’s credit
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rating, the lease structure and rental profile. The rental payments are typically securitised and distributed to credit investors
in bond format, offering investor diversification and increased liquidity
Sale and leasebacks are the most commonly utilised of these options – in part because of the relatively low level of complexity
involved and strong market appetite for these types of disposals. For UK pension funds and annuity investors in particular, long
term indexed sale and leasebacks are a significant source of annuity compliant investments.
Investors in corporate real estate are increasingly showing an appetite for collaborating with occupiers during disposals. This
can take the form of acquiring properties that are vacant or on short leases and sharing the upside created when the occupier
commits to a longer lease post acquisition.
Some investors are also partnering with occupiers in the procurement of new facilities via direct forward funding. This opens
the opportunity for the occupier to have much greater input into the specification and design of the property – including setting
high standards for building operations and sustainability. Furthermore, the growth of more specialised landlords is providing a
viable route to monetisation of more niche property types, including manufacturing facilities, laboratories and data centres.
References
1. I n this year’s Raising Capital from Corporate Real Estate report we have included
government disposals and a limited number of non-corporate sale and leaseback
transactions (such a property investor who may have sold their own corporate office).
Our historic time series also includes these transactions, so the figures in this year’s
report are not directly comparable to our previous reports.
2. https://www.engie.com/en/journalists/press-releases/swisslife-nexity-engie-construc-
tion-new-head-office
3. https://www.londonstockexchange.com/news-article/IRSH/op-cooperative-to-sell-
and-lease-back-the-vallila-property/14405089?lang=en
4. https://newsnreleases.com/2020/10/20/telenor-selling-its-hq-building-at-fornebu-for-
nok-5-billion/
5. https://www.reuters.com/article/uk-bp-realestate-m-a-idUKKBN2801W3
6. https://www.petrolplaza.com/news/25780
7. https://www.tristancap.com/news-and-media/press-releases/tristan-fund-acquires-
50-site-french-logistics-portfolio-major-sale
8. https://www.propertyfundsworld.com/2020/05/01/285222/aviva-investors-lime-prop-
erty-fund-completes-sale-and-lease-back-deal-next
9. https://www.propertyfundsworld.com/2020/03/09/283731/deka-immobil-
ien-buys-bm-distribution-centre-bedfore
10. https://www.lcnpartners.com/mercadona/
11. https://www.proactiveinvestors.co.uk/companies/news/923443/supermarket-income-
reit-clinches-sale-and-leaseback-deal-with-waitrose-923443.html
12. https://realassets.ipe.com/news/londonmetric-expands-portfo-
lio-with-73m-deals/10046435.article
13. https://reactnews.com/article/dutch-supermarket-chain-jumbo-sells-e325m-portfo-
lio-to-annexum/
14. https://www.ironmountain.com/about-us/news-events/news-categories/press-releas-
es/2020/october/iron-mountain-and-agc-equity-partners-announce-formation-of-300-
million-euro-joint-venture-to-develop-and-manage-frankfurt-data-centerRaising Capital from Corporate Real Estate 14 Contacts Nick Compton Michael Evans Head of Corporate Capital Markets, EMEA Director - Corporate Capital Markets, EMEA nick.compton@eu.jll.com michael.evans@eu.jll.com Owen King Christian Denny Head of UK Corporate Research & Strategy Director, EMEA Research & Strategy owen.king@eu.jll.com christian.denny@eu.jll.com © 2021 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to JLL and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of JLL and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorization of JLL. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof.
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