Wednesday, January 13, 2010

Forbes Uses Net Lease Sale Leaseback to Sell HQ

The net lease industry has inked a number of high-profile deals lately. One of the first deals of 2010 is the announced sale-leaseback of Forbes Media’s 144,000 sq. ft. headquarters in New York’s West Village to New York University. According to the Wall Street Journal, the deal was structured with Forbes agreeing to a 5-year lease deal.

If reported sales figures are correct, NYU probably got a heck of a deal. The building originally listed for $140 million in 2007, and according to the New York Post it ultimately sold for $55 million or about $380 per square foot.

Perhaps Forbes was taking a page from the New York Times, which sold its headquarters in a sale-leaseback for $225 million with a 15-year lease commitment. Yet, Forbes’ 5-year lease agreement definitely raises eyebrows in a net lease industry where 15- and 20-year deals are far more the norm. So, unless NYU has taken on the risky role of real estate speculator, there may be a bigger strategy at play here.

Will Forbes give up all or part of its space when its lease is up in 2015? The safe bet would say yes. The bigger question may be whether we can expect to see more of these large net lease sales in the coming months. Not only are cash-strapped companies such as Forbes using sale-leasebacks to raise capital, but it appears that net lease deals also are providing an alternative for companies that are in transition in this volatile economy.

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