Price Premiums and Market Efficiency

Sale-Leaseback transactions are ubiquitous in US real estate markets with annual volume estimated to be greater than $7 billion. However, there is no evidence concerning the price impact of such transactional arrangements. Using a data set of sale-leaseback transactions, this study examines the price impact on commercial property transactions across seven markets. We show that transactions structured as sale-leasebacks occur at significantly higher prices than market transactions. In addition, we find that, after accounting for income differentials, buyers and sellers are appropriately pricing the transactions resulting in no undue advantage to either party, that is, the expected price premium is accounted for in the SLB prices