International Oilfield Services Sale/Leaseback Case Study

SUCCESS STORY


INTERNATIONAL OILFIELD SERVICES COMPANY

International Oilfield Services Company_JimPratt

Sale/Leaseback Transactions

A large international oilfield services firm coming off of an aggressive acquisition program, found itself highly leveraged.  When the price of oil dropped by over 70% and revenues plummeted, they began considering various strategies to create liquidity. The firm owned several facilities in the Houston area including a multi-building facility on a large tract in the Houston Ship Channel area, and determined a sale and leaseback of the properties was the appropriate strategy. A discreet marketing approach was chosen targeting a handful of qualified buyers. While the properties were attractive and the long-term leases appealing, several of the investment funds were unable to proceed due to the firm’s high debt levels. Additional word-of-mouth marketing ultimately located an institutional real estate investor/developer and a deal was structured on the larger property, providing significant liquidity for the client.  A transaction was also closed on the smaller property with a local investor.

The Process
  • Determine a rental rate that works for the seller that is in line with market rates
  • Select a target cap rate but understand that the market will establish the cap rate
  • Set up a customized website with full marketing package and due diligence documents
  • Establish a time line for tours, offers, feasibility period and closing
The Results
  • The competitive process, even with a smaller number of prospects and bidders, ensures a market price
  • Appropriate securitization can offset perceived “industry risk” and “credit risk” while maintaining a higher market price
  • A repurchase option allows the seller to repurchase the property when conditions improve in the future
  • The absolute net lease allows the tenant total control of the facilities with a passive investor as landlord

Related Experts

Jim Pratt

Principal | Houston

Houston - Sugar Land

Jim Pratt has more than 35 years’ experience in commercial real estate.  Prior to joining Colliers in 2009, he was a Principal with NAI Houston. In addition to representing tenants, buyers and sellers of real estate, Jim has represented many institutional and private owners in the leasing of office and industrial properties and has developed an in-depth understanding of the dynamics involved and what makes a deal work for both tenants and landlords.  He is known for his significant creativity in the structuring of unique solutions for complex assignments, resulting in “win-win” transactions.  His analytical skills and his ability to communicate the pertinent facts throughout the negotiation process have produced significant results.

Jim has represented tenants and owners ranging from local entrepreneurs to large corporations in transactions in Houston and throughout North America, completing more than 100 assignments outside of Texas.  He has handled all types of industrial and land  requirements in addition to offices leases, and the acquisition and disposition of all types of real estate. In the last economic downturn, Jim helped structure sale/leasebacks providing significant liquidity for one of his clients.  Jim is currently assisting clients with the evaluation and implementation of this same strategy, as well as lease restructuring where applicable.

Prior to entering commercial real estate in 1985, Jim served as a project manager on several multi-million dollar commercial construction projects for W.S. Bellows Construction Corporation.  His educational background in architecture has also proven invaluable in assisting landlords and tenants in the evaluation process involved in site selection.

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