There is word that American Airlines is in preliminary discussion with the Oklahoma Development Finance Authority regarding a sale-leaseback transaction involving two of the company's maintenance facilities in Tulsa.
The sale-leaseback talk involves a possible $6.5 million state-assisted purchase of those facilities, which include American's Composite Material Repair Facility and its Auxiliary Power Unit facility. The transaction, sources report, is aimed primarily at saving American Airlines money and saving Tulsa jobs; the carrier reported a $1.04 billion loss in the first quarter of 2003. Ideally, the airline would receive a lower interest rate from the ODFA than it would from a commercial lender.
News of the preliminary discussions comes as W.P. Carey & Co. LLC announced it has completed more than $542 million in sale-leaseback transactions during the first nine months of 2003, a sizeable jump from the $500 million it recorded in 2002. According to the firm, it completed $211 million in sale-leaseback in the third quarter alone: a $44.9 million acquisition of two health and fitness centers (totaling 279,000 square feet) and a $31.6 million build-to-suit of a 270,000 square foot technical education campus.
Despite coming under pressure from FASB discussions, sale-leasebacks - and their sister securitization, credit tenant leases - have come through relatively unscathed. Though they are fairly new to the scene, it appears more entities are taking sale-leasebacks under consideration as a valuable cost-saving tool during less-than-ideal economic conditions.
In April of this year, in an effort to reduce Illinois' large budget deficit, Gov. Rod Blagojevich proposed a sale-lease of Chicago's 980,000-square-foot Thompson Center, in addition to other real estate transactions designed to reduce the state's estimated $5 billion budget gap next year. While investor demand for the outright sale of office buildings may be on the cool side, the governor's remarks indicated interest by investors in a sale-leaseback of the Thompson Center, located in the city's North Loop, was fairly strong. The center, at 17 stories and 74,000 square feet of commercial space, also features an atrium and Jean Dubuffet sculptures.
Of course, no story involving sale-leasebacks would be complete without unearthing some salacious scandal.
Last month, employees at Agence France-Presse, a French news company, staged a 24-hour strike thanks to talk over a sale-leaseback involving the building in which the agency is headquartered. The Board of Directors of AFP was considering a 12- to 18-year term sale-leaseback to a consortium of insurers, in an effort to help pay down its $72 million deficit. Workers were fearful the company would not have the money to buy back the building. AFP employees throughout the world observed the work stoppage as well.